Venetocongiuntura results: industry closes 2023 with a slowdown.

Mario Pozza, president of Unioncamere del Veneto: "The fatigue phase of the Veneto production system is confirmed, due in part to the various close shocks that have hit the economy. Most sectors are down, with food and industrial machinery holding up. Foreign orders are weak'.

Economy - published on 06 March 2024

Fonte: ufficio stampa Unioncamere del Veneto

Survey results presented

by Unioncamere del Veneto in the fourth quarter of 2023.

Venice, 05/03/2024 | The post-Covid expansionary phase seems to have come to a standstill. After the strong rebound in Veneto’s manufacturing activity in 2021 (+16.6% annual average) and the positive tail end of 2022 (+4.5% annual average), industrial production closes 2023 with a tendential annual average decline of -2% (-3.5% in Q4 2023), the first negative figure since the Covid period. And the weakness of international demand was confirmed in Q4 2023, with orders from the foreign market down -5.6% year-on-year.

The number of companies affected by an increase in production is stable at 46%, but entrepreneurs’ opinions on the outlook for the first quarter of the new year are uncertain, with 35% expecting production to remain stable.

This is the picture that emerges from the data of VenetoCongiuntura, the economic analysis on the manufacturing industry carried out by Unioncamere Veneto (Regional Union Of Chambers Of Commerce Of Veneto) and conducted on a sample of over 2,000 companies with at least 10 employees, referring to a total employment of over 93,000 people.

“The data tell us of a slowdown, due in part to the various close shocks that have hit the economy. – The regional manufacturing industry is travelling with the handbrake on, looking for a way to normalise, after the post-Covid recovery and the efforts made to contain inflation and price speculation. However, we have to deal with negative indicators compared to last year. First cause: the weakness of international demand, with order intake from the foreign market down by -5.6%. It is a process also conditioned by the weakness of some important economic partners such as Germany (to which almost 14% of regional exports are directed and which represents the first market for exports) and by the international tensions that have arisen on several fronts (Russia-Ukraine conflict, Gaza-Israel and the consequent difficulty of navigation in the Suez Canal). The hope is that we have reached the low point, although the trend reversal will probably be gradual and differentiated according to sectors. Our invitation to businesses is to face these uncertain scenarios by investing in digitalisation, market diversification, and sustainability, but a restrictive monetary policy does not help. As a system of chambers of commerce , and also as Assocamerestero, of which I am President, we are engaged in supporting businesses in these processes of change, but the underlying climate needs to change and Europe must not arrive too late to cut rates, when the damage could be greater than the benefits”.

Specifically, in the October-December period, production on a trend basis, i.e. compared to the fourth quarter of 2022, fell by -3.5%, more pronounced than in the previous month (-2.2%). The seasonally adjusted change in the economy also remained negative (-0.6%, it was -0.9% in Q3), showing that the slowdown in the production system continued. This was also confirmed by the indicator of the degree of capacity utilisation, which continued to fluctuate throughout 2023 at around 70%, settling at 72% in this last quarter, but distancing itself from the average 75% in 2022.

The average distribution of production judgments remains unchanged compared to the previous quarter: 46% of the sample are affected by an increase in production, while 38% of the companies declare a decrease and 16% declare substantial stability.

As regards the type of goods produced, the trend change in production is slightly positive for capital goods (+0.5%), perhaps due to a carry-over of orders collected in the previous months. The production of consumer goods, on the other hand, fell (-3.5%), and that of intermediate goods fell more substantially (-5.2%).

Most of the sectors monitored at regional level showed a trend decrease in production. Only the food and beverages sector held up (-0.1%), with orders from both the domestic (+2.1%) and foreign (+2.9%) markets, and machinery and mechanical appliances (-0.3%), but for this sector a drop in demand was observed, especially from abroad (-5.8%).

Declines were recorded for the other sectors. Other manufacturing (-3.1%), which includes the chemical sector, and the wood and furniture sector (-3.4%) show negative changes just above the regional average. This is followed by decreases in the marble, glass and ceramics (-4.5%), means of transport (-5.1%), rubber and plastics (-5.2%), electrical and electronic machinery (-5.5%), metals and metal products (-5.6%) and paper and printing (-5.9%) sectors. The most pronounced drop in production was recorded for textiles and clothing (-7.6%), with sharp reductions in both domestic (-6.6%) and foreign (-10.6%) orders.

By contrast, the number of days of production secured by the order book remained stable at 58.

With regard to the level of inventories of finished goods in the quarter under review, 58% of the industrial enterprises consider them to be adequate, 6% of the sample consider them to be low, and 7% consider them to be surplus. 29% of the enterprises do not hold any inventories.

In Q4 2023, the weakness of international demand was confirmed: geopolitical tensions, the normalisation process of value chains and efforts to contain inflation continued to have a negative impact on new orders, especially foreign orders. Order intake from the foreign market fell by -5.6% year-on-year, and by -3% from the domestic market. The year-on-year change in total turnover marked a significant decrease of -3.5%, also explained by the reduction of the inflationary pressure on prices.

The confidence of entrepreneurs in the manufacturing sector for the first quarter of the new year still remains uncertain. Compared to the third quarter of the year, the share of entrepreneurs surveyed who expect a stable production situation increases to 35% (it was 30% in Q3 2023; 34% in Q4 2022). The share of entrepreneurs who are betting on an increase in production decreases to 41% (it was 44% in the previous quarter, 45% a year ago) and the share of pessimists who expect a decrease decreases to 24% (it was 26% in Q3 2023 and 21% a year ago). Expectations for orders are brighter for those from foreign markets: the share of pessimistic entrepreneurs decreases to 21% (was 27%) compared to an increase to 36% (32%) of those who expect stability. For domestic orders, on the other hand, the share of entrepreneurs expecting a stalemate increased to 38% (was 35%).

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