105th Industry Sector Analysis Report, with Prometeia
Together with Prometeia, Intesa Sanpaolo presented the ASI (Analysis of Industrial Sectors) Report, which forecasts that in 2024 the turnover of the Italian manufacturing industry will stabilise at €1,160 billion at current prices: +€250 billion compared to 2019, closing a record post-Covid cycle. At constant prices, a moderate rebound (+0.6%) is expected, only partly recouping the losses in 2023 (-2.1%).
The contribution of the foreign channel (+2.6%) will be crucial. Domestic consumption is also on the rise: services will be the driving force, while manufactured goods will be less dynamic, with growth spurts for durable goods for mobility and stable spending on foodstuffs.
In the medium-term scenario, the Italian manufacturing industry is expected to grow at more dynamic rates in 2025-26 (+1.2% on average per year) and stabilise at around 1% in the following two years.
Investments in the double digital and environmental transition will be indispensable to support the competitiveness of Italian companies and will be favoured by the expected reduction of interest rates starting in the second half of 2024.
The ASI Report, now in its 105th edition, examines the manufacturing industry and provides scenario analyses and forecasts of growth and profitability potential for around 40 sectors, grouped into 15 categories.
Watch an interview with Gregorio De Felice (Chief Economist and Head of Research Department, Intesa Sanpaolo):
Industry Sector Analysis Highlights – May 2024
Manufacturing turnover in 2024: forecasts
The turnover of Italian industry is expected to stabilise at €1160 billion by the end of 2024 at current prices (+€250 billion compared to 2019), closing a record-setting post-Covid cycle. After a first half of the year that remained weak, in line with the prevailing trend in 2023, Intesa Sanpaolo's economists expect a more dynamic second half of the year, thanks to the effects of the resumption of inflation on domestic and international demand, as well as the consequent fall in interest rates.
The ISTAT index of Italian manufacturing business confidence still remains negative, but is steadily recovering from its November 2023 lows. Companies are less pessimistic on production expectations, and this could soon give rise to a cyclical reversal, ending the phase of falling activity levels underway since Q2 2023.
Export opportunities
Global trade will gradually regain momentum after a setback in 2023, despite the geopolitical risks. Good export opportunities will emerge both in non-European markets – especially the US, which is performing better than expected – and within the EU area, which had slowed down the most in terms of trade in 2023.
For Italian companies, exports could grow by 2.6% at constant prices, which would confirm the strong competitiveness they have shown in recent years.
Domestic demand will contribute less
Thanks to the recovery of disposable income eroded by inflation, domestic consumption will keep growing in 2024, coming in at above pre-Covid spending levels, even at constant prices, after the break-even in 2023. Services (in particular those related to social life, such as hotels and restaurants, culture and entertainment) and durable goods for mobility will be the driving forces, continuing to grow robustly after the low point reached during the pandemic. Spending on foodstuffs will be substantially stable. However, household durables (furniture and home appliances) will be affected by the deflating effect of incentives for building renovations.
It will be investments in construction that will slow most in 2024, after the exceptional cycle of the post-Covid years. The downturn in residential construction, driven by a less robust contribution from redevelopment (reformulation of the Superbonus incentive and definitive end to credit sales and invoice discounting) will be only partially offset by investments in civil engineering projects, supported by the expected acceleration of initiatives related to the NRRP.
Investments in capital goods will continue to grow in the current year, but at a less dynamic pace than in the post-pandemic years, affected by the period of transition to the new Transition 5.0 incentive plan.
Growth sectors
The sectors that will have the greatest growth opportunities in the medium term are those related to the twin transition and foreign markets:
- Electrical engineering (+2.6% average per year in 2025-28, in deflated turnover terms)
- Mechanical engineering (+2%)
- Electronics (+1.4%)
- Motor vehicles and motorbikes (+0.9%).
The outlook for FMCG (+2.3%) and pharmaceuticals (+1.9%) is also positive, partly due to brisker domestic consumption than in other spending segments.
Exports will be the main driver of growth for producers of typical Italian-made consumer goods, such as the fashion system and food and beverages.
On the forecast horizon in 2025-28, Intesa Sanpaolo analysts expect manufacturing margins and profitability to hold steady overall (average EBITDA at 9.2% and average ROI at 7.8%), which will thus remain at high levels, ensuring that companies are able to sustain investment-related debts.
The May 2024 ASI report takes an in-depth look at changes in household expenditure in the main European countries.
The comparison shows that Italian household consumption remains weak overall. At the end of 2023, Italy still presented a lower level of domestic consumption than in 2007 (-1.1%, again at constant prices) as competing nations posted gains: Spain (+2.3%), France (+12.6%) and Germany (+13.4%, despite the weakness of consumption in the last two years).
This phenomenon is the result of several factors. First and foremost, it is due to differences in wages and per capita income – partly structural and partly linked to successive phases of the European economic cycle – which have affected some countries more than others, the level of support provided by governments and the public services available.
Also relevant are the cultural changes in consumer purchasing preferences under way for some time, subsequently accelerated by the pandemic. The uncertainty surrounding Europe's demographic future leads us to assume downward pressure on consumer spending in the coming years. A stagnant or even shrinking population could in fact become the first of the barriers to domestic consumption growth and provide a further impetus for the shift in the composition of purchases between goods and services, in view of a progressive ageing only partly offset by the contribution of foreigners.
For Italy, the demographic future will be characterised by a significant increase in single and elderly households, which over the next 20 years will come to make up nearly 38% of households, as indicated by the most recent ISTAT demographic forecasts to 2042. At the same time, the number of couples with children is projected to decrease quite sharply, accounting for just over 25% of resident households in 2042. These changes in the structure of the resident population will also give rise to different needs, desires and purchasing behaviour.
Last updated 27 May 2024 at 11:02:08
