Wednesday, December 2, 2020

Monthly GDP: April 2020


Unprecedented drop in GDP due to the lockdown


The unprecedented contraction of real GDP at the beginning of the year signalled by Istat’s flash estimate (-4.7% q/q in 1Q20) and thecollapse of industrial production in March (-28.4% m/m), as well as the new lows reached by the April economic surveys, reveal theheavy economic effects of the ongoing pandemic. In this context, it is even more difficult to make short-term growth forecasts thatcapture the severity of the current shock. Facing this extraordinary historical period, the difficulties are not only in carrying out theforecasting exercise but also in the data production by the National Statistics Institute. The updated monthly estimate of the real GDP points a further contraction in economic activity in April (-2.3% m/m, -10.2% y/y), afterthe 2.5% drop in March, which is extensively revised from the previous estimate of -0.6%. The industrial sector is largely compromised, making an exceptional drop in March (-28.4% m/m), the strongest among the Eurozonecountries due to the more stringent containment measures adopted by the Italian government. In the manufacturing sector, activitycollapsed by 30.6% m/m, a decline that widens in sectors as textiles, clothing, leather goods and accessories (-51.1%) and means oftransport (-60.1% ). Marked reductions are observed in capital goods (-39.9%), intermediate goods (-27.3%), consumer goods (-27.2%)and energy (-10.1%). The surveys in April update the new minimums already reached in March. The composite PMI index recorded the deepest collapse in22 years, reflecting the extraordinary contraction of production in manufacturing (31.1 points) and services (10.8).

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