Italy’s industrial engine sputters on German economic malaise

Bloomberg

The tremors from Germany’s downturn are reverberating in Italy — particularly in the country’s industrial heartland.
Companies big and small in the prosperous northern regions have been hit by declining sales as Europe’s largest economy buckles under a manufacturing slump.
That’s a problem for Italy’s government, desperate to boost its own economic growth to help it get control of Europe’s largest public debt load.
Germany is Italy’s top export destination, with 58 billion euros ($64 billion) of goods sold in 2018, mostly industrial products, from auto components to refrigeration systems to chemicals.
The impact is tightly concentrated. Three-quarters of sales to Germany are produced in five north-central regions: Lombardy, whose capital is Milan; Piedmont; Tuscany; Emilia Romagna and Veneto, the region surrounding Venice.
“Compared with the rest of Italy, the north is extremely exposed to the trend of exports, and what’s happening at the global level,” said Giuseppe Pasini, president of the Industrial Association of Brescia, near Milan. “It’s not only the German problem, but also uncertainty about the tariff war between the US and China, and the Brexit issue.”
A number of car-components makers are clustered throughout Lombardy and Piedmont, whose capital Turin is birthplace of Agnelli family-founded automaker Fiat.
Fonderia di Torbole, a disc brake maker in Brescia, is among those with an interest in a strong Germany, as it accounts for about a third of the group’s 160 million euros of annual sales. Clients include German car giant Volkswagen AG as well as Toyota Motor Corp and Hyundai Motor Co.
“Fortunately the impact has been limited for us,” since the company’s components are mainly for non-diesel vehicles, said Chief Executive Enrico Frigerio, whose grandfather started the foundry in 1923. Still, he’s halted Saturday production shifts in the wake of declining sales.
“I’m hoping we can see a recovery in the first half of 2020,” Frigerio said.
That may be optimistic. Germany’s surprise third-quarter expansion was only 0.1%, and it may not improve this quarter.