16 December 2002, 15:39  Italian October Production Drops Most in Four Months

Rome, Dec. 16 (Bloomberg) -- Italian industrial production fell the most in four months in October, led by Fiat SpA, the latest sign Europe's economy is stagnating. Production dropped 0.9 percent from September, the most since June, and declined 2 percent from a year earlier, the government said. Output also fell in France, Germany and the U.K. ``Things are going really quite badly,'' said Ivano Gerardi, chief executive officer of Milan-based Gerardi SpA, which makes car parts for luxury cars such as Ferrari SpA and Rolls-Royce Plc. Orders are ``fewer and fewer,'' Gerardi said. Europe's fourth-biggest economy grew 0.3 percent in the third quarter, while the region's economy may shrink in the first quarter, the European Union's executive branch estimates. Fiat's auto business has been unprofitable for seven of the last eight years. Strikes at the company may curb production further.
Manufacturing has also dropped in Europe's biggest economies. French industrial output fell 0.6 percent in October, the most in a year, while manufacturing in Germany, Europe's largest economy, fell 2.1 percent the same month, the biggest drop in 18 months. Italian factories made fewer cars, trucks and steel products in October, the government said. Manufacturing accounts for about a third of the economy and Fiat generates about 0.6 percent of gross domestic product.
`Rough Year'
Fiat car sales, which have slumped every month this year, tumbled 22 percent in November on waning demand for its Stilo and Punto models, a report showed last week. Strikes at Fiat probably will cripple production further. Today, workers at Fiat's Cassino factory in southern Italy walked out for eight hours. ``We've had a rough year,'' said Alberto Procopio, an executive director at Italdesign-Giugiaro SpA, the Italian designer of cars including the Fiat Uno and the Volkswagen Golf. ``Fiat's crisis has weighed on us and others.'' The country's transportation was disrupted today as bus, tram and subway workers staged an eight-hour strike to demand higher wages. More than 28 million working hours were lost due to strikes in the first 10 months of the year, the most since 1990, the government said. Milan-based Pirelli, Europe's biggest cablemaker, is another manufacturer struggling to recoup losses and is eliminating 2,400 jobs, or 6.4 percent of its workforce, as demand for telecommunications equipment wanes. Prime Minister Silvio Berlusconi, also the country's richest man, is cutting income taxes by about 5.5 billion euros ($5.6 billion) next year to help boost growth.
ECB Rates
Earlier this month, the European Central Bank cut interest rates for the first time in more than a year to help boost spending. ``The very low interest rates are a good sign because they're an incentive to invest,'' said Giovanni Dell'Aria Burani, the chairman of Reno de Medici SpA, a cardboard and paper maker based in Milan. ``If money is cheap, sooner or later the rebound must come.'' Italian executives and consumers need a lift. Consumer confidence has dropped in eight out of the last nine months, and business confidence has failed to pick up. Plans for more than 10,000 job cuts at Fiat and Pirelli SpA probably will weigh on confidence in coming months. Italy is also looking to the U.S., which buys about a tenth of its exports, to lift demand and power a recovery. Industrial production in the U.S. unexpectedly fell last month as an economic rebound failed to take hold. Italy's trade deficit in October more than tripled to 676 million euros.
November Outlook
Manufacturing is expected to have risen in November, according to two separate surveys. The Ref research institute predicts a 0.2 percent gain in November, basing its forecast on electricity consumption, while a survey of Italy's largest manufacturers indicated a 0.4 percent increase from October. Production of intermediate goods, such as car parts and refined petroleum, fell 0.5 percent in October and declined a 0.7 percent in the year. Capital goods production was down 3 percent from September and 4.8 percent from a year earlier. Consumer goods slipped 0.2 percent from September and 3.7 percent from October last year, the government said. //www.quote.bloomberg.com

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