Italy’s economy dips as Germany supports European growth

GROWTH in Germany, Europe’s largest economy, looks set to support the outlook for the euro area even as Italy dices with stagnation, according to the latest data.

Economists said it pointed to quarterly economic growth of about 0.3pc in the fourth quarter of this year, up from 0.2pc in the second quarter.

October’s headline composite output index for the euro area was revised upwards from an initial estimate of 52.7 to 53.1 as Germany’s Composite PMI was revised up significantly from the first estimate of 52.7 to 53.4.

“The national breakdown added to the evidence that Italy’s economy is struggling. In fact, on the face of it, Italy’s Composite PMI suggests that after stagnating in the third quarter, the economy contracted in October,” said Jack Allen, senior European Economist at Capital Economics.

Italy is mired in a budget dispute with the European Union over its spending plans and its populist government has said it will not stand down, saying that the third-largest euro area economy needs a budget to boost growth after austerity.

The Purchasing Manager Index data released yesterday provided a more upbeat assessment for Europe than a survey by German research institute IFO for the euro area which dropped to its lowest level since mid-2016 and fell to 6.6 points for the outlook for the final quarter of this year from 19.6 points in the third quarter.

“The euro area’s economy is moving into rough waters,” the research body said in its report, citing plunging expectations in Italy and Spain.

The world economy has now left behind an era of synchronised growth with the prospect of a full-blown trade war between the United States and China weighing on sentiment. With the US midterm elections threatening to overturn Republican control of the House of Representatives, there is also the risk of a return to government shutdowns which could dampen business and consumer sentiment in the world’s largest economy.