The manufacturing economy in Q3 2021 The sector continues to grow, surpassing pre-Covid levels, but supply and pandemic uncertainties are weighing on it

The criticality of supplies emerges from the economic variations, more accentuated for production than for orders, especially in Treviso. However, optimistic forecasts for the last part of the year, Covid permitting.


Economy - published on 19 November 2021


https://www.trevisobellunosystem.com/tvsys/img/notizie/mario_pozza.jpg
Source: Press office of the Presidency of the Chamber of Commerce of Treviso Belluno|Dolomiti
The comment of President Mario Pozza
We are continuing to recover well, – commented Mario Pozza, President of the Chamber of Commerce of Treviso-Belluno|Dolomiti. – Even during the ‘summer break’ the manufacturing
sector in our area maintained very high production rates.
The comparison with the third quarter of last year is absolutely positive: in Treviso industrial production grew by +8.4%, in Belluno by +16.9%. Plant utilisation remained at almost 75% for both
provinces and the order book ensures almost 60 days of production.
It is true, – Pozza points out, – that between the second and third quarters we witnessed an economic slowdown. This slowdown could be attributed to a variety of causes: the
physiological drop during the summer months, but also the gradual return to ‘normal’ production rates. However, we do not hide the fact that there are still some critical issues on the supply
side of raw materials and semi-finished products, especially at international level: the general raw materials index increased by 74% between October 2020 and 2021. This is clearly having a
different impact on the various sectors, as in the case of the transport equipment sector, which is experiencing serious difficulties due to the slowdown in the microchip industry, with 60% of
respondents reporting a drop in production compared to the second quarter.
There are, however, sectors that are still in a positive phase, including, with particular emphasis in our areas, eyewear, whose production capacity has returned over 75%, and the fashion
system, which has almost filled the gap with the other sectors accumulated last year.
It is also encouraging to see the optimism with which entrepreneurs from Treviso and Belluno are looking to the coming months. The balance between positive and negative judgments for the fourth
quarter is, in fact, higher not only for 2020, but also for 2019. These are strong signals of a territory that looks to the future with great hope.
Step by step, – continues Pozza, – we have managed to return to pre-Covid production levels. The general climate remains positive for the end of the year and is in line with both
the Markit survey, the note of 2 November confirming that the Italian manufacturing sector continues to excel, and with the upwardly revised estimates of the International Monetary Fund, which
forecasts growth of +6.1% for Italy at the end of 2021. In short, signs that our country’s economy is holding up well.
But we must be careful, because we could lose all the work done this year in an instant. In the last few weeks, in fact, everyone’s attention has been drawn to the rise in the pandemic curve.
We cannot afford, therefore, to lower our attention and we must maintain all the good habits we have developed and learned to live with in recent months: vaccines and the green pass, among
others.
This is the only way, – concludes Pozza, – to avoid new restrictions and new closures, and to safeguard the health of our businesses and families, which is even more important as
the Christmas season approaches.
The international and national picture
In the third quarter of 2021, the recovery of the global economy continued, thanks in large part to the vaccination campaign which, worldwide, allowed many of the measures to be removed to
combat the pandemic
. However, there is no room for complacency, as warnings of renewed outbreaks and possible new restrictions have increased in recent weeks.
This caution is also behind the International Monetary Fund’s revision of its 2021 growth estimates for the global economy. The overall growth estimate reported in the October World Economic
Outlook is revised to +5.9% for 2021, down -0.1% from the July estimate. It also lowered its estimate for the United States, which it expects to grow by +6.0% in 2021 instead of the +7.0% forecast.
On the other hand, the estimate for the Eurozone was raised from +4.6% to +5.0% and, specifically, that for Italy, with +5.8%, against the +4.9% forecast in July.
The IMF estimates were then matched by the new preliminary GDP estimates released by Istat and Eurostat on 29 October, which revised upwards Italian growth to the end of 2021 (+6.1%), thanks also
to the good performance in the third quarter, +2.6% compared to the second half of the year, while the Eurozone average for the same period was +2.2%. This is therefore a positive phase, with GDP
rising more than expected in many countries, with the major Eurozone economies returning to pre-crisis levels sooner than expected.
As analysed by Congiunturaref. experts in their note of 3 November, the resilience of the Italian economy in the third quarter is the result of better industrial activity than in other European
economies. This, Congiunturaref. also reports, is partly due to the lower weight of the automotive sector, which is suffering numerous interruptions due to problems in the microchip supply chain,
and partly to growth in construction, which has driven some sectors of industry.
A further decisive aspect is linked to tourism, which, thanks to the reopening and increased presence of Italians, recorded a positive trend in the summer months.
However, as also highlighted in previous reports, the recovery in production levels in 2021 was accompanied by a particularly intense acceleration in prices. The speed of demand recovery in the
phase of removal of distancing measures caught many manufacturers unprepared, also hampered by the unavailability of raw materials and semi-finished products due to the disruption of some value
chains, such as the aforementioned microchip supply chain.
On the raw materials front, while some situations are returning to normal (this is the case for the price of ferrous materials), the last few months have seen a surge in the prices of energy
goods. Between October 2020 and 2021, the price of natural gas increased by 390.8%, reports the International Monetary Fund, with direct consequences on the cost of methane. In addition to bill
prices, this is having repercussions in various sectors: transport, where methane is used as a fuel and in the production of AdBlue, the additive used in less polluting diesel engines, but also
in the agri-food sector, where it is needed to make nitrogenous fertilisers.
In addition, there are also climate change issues: record temperatures and fires in Canada this summer, for example, have led to a collapse in wheat production, the price of which has risen by
44.5% in the last year.
In the manufacturing sector, the situation described above is confirmed by the Markit PMI index. Overall, the PMI index for October was 54.3, for the eurozone 58.3 and for Italy 61.1. All
indices, therefore, are in expansionary territory, but with companies everywhere reporting some signs of slowdown, mainly due to the aforementioned supply problems that are hampering their
production programmes. On the one hand, therefore, they are reporting new orders that continue to grow (even if in some sectors a physiological return to stability is being observed) and, on the
other, they are denouncing a supply that cannot keep up, due to a lack of material and personnel, with unfinished work, delivery times and prices that continue to rise.
Economic dynamics in the provinces of Treviso and Belluno
The general situation just described is also well confirmed by the economic dynamics in the provinces of Treviso and Belluno, analysed by the VenetoCongiuntura survey, edited by the regional
Unioncamere
. For the third quarter of 2021 the sample analysed is of 2,001 companies with more than 10 employees: 436 of these are from Treviso (which report 17,982 employees), 71 from
Belluno (which report 2,926 employees).
The basic picture is the following: the recovery of the manufacturing industry continues, the yearly variations of the different indicators are robust (certainly facilitated by the comparison
with a period when the economy was recovering), but the output levels are in some ways even higher than the situation recorded 24 months ago (at least in Treviso).
However, the economic pace (compared to the second quarter) is affected by some signs of slowdown, partly due to the causes mentioned above (supply difficulties), partly due to the physiological
downturn during the summer break. Forecasts for the last part of the year, however, remain largely positive. At the time of the interviews (October), the absolute majority of companies still
estimated an increase in production, turnover and orders.

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