Industry with a suitcase

by Marco Fortis*

2011 was definitely a year with two faces for Italian industry: while it continued negative for producers oriented toward domestic demand, that in Italy appears to be in a state of chronic depression, it was more positive for exports, although they lost some momentum in the last quarter of the year due to the general slowing of the world economy that has everyone worried, thinking of 2012.

The export balance of 2011 can be considered more than satisfactory. In the first place, exports as a whole almost completely recovered, in value, the levels reached before the crisis. In the second place, the Italian enterprises showed unexpected ability to penetrate emerging markets. In the third place, the recovery involved a very large number of products.

According to the deseasonalized data of ISTAT, the Italian office of statistics, in September 2011 the monthly flow of Italian exports reached 32.1 billion euros, the fourth highest all-time level and only 2% below the maximum monthly level on record reached in February 2008.

But today's data, with respect to those of three and a half years ago, are much more significant because the peaks reached then came at the height of the global real estate/financial bubble that «doped» the purchases in our client countries, while the levels reached again today, after exports had fallen more than 30% from the previous maximums, were entirely won on the field and, what is more, in times of austerity.

This was mainly due to exports outside the EU which, with respect to the previous precrisis record levels, are higher now by 6% after falling by 31% between February 2008 and the lowest point in August 2009. Italian producers have wagered heavily on emerging markets.

The recovery of Italian exports in the EU countries has been slower, as many of them are still in the grip of a deep recession: thus total Italian exports in the EU in September were still down by about 9% with respect to the previous maximums, reached in April 2008.

We can attempt a first balance of the individual markets and products that, from the standpoint of Italian exports recorded the best performance in the first eight months of 2011 (based on the ISTAT data currently available) compared to the same period of 2008.

These data confirm the greater dynamism of our exports to developing countries. Considering only the most important markets, the strongest growth was toward Iraq (+246%): this is a medium-sized market toward which Italy made exports between January and August 2011 for 313 million euros.

Among the other medium-sized markets where our exports expanded the most in a comparison between the first eight months of 2008 and 2011, the most outstanding were Congo (+117%), Bangladesh (+115%), Colombia (+66%), Lebanon (+59%), Chile (+53%), Jordan (+52%), Vietnam (+35%) and the Philippines (+29%).

But Italy's exports increased considerably also toward most of the BRIC countries.

The strongest growth was in China (+56%): a market whose value for us in the first eight months of 2011 was 6.3 billion. There was also a strong increase in sales in Brazil (+44% to 3.1 billion euros) and India (+19% to 2.4 billion), while in Russia we still have not recovered the record levels of the period January-August 2008 (6.9 billion euros) and in comparison with the same period of 2011 (5.9 billion) we are still behind by 14%.

Other important markets outside the EU toward which our exports shows significant increases in 2011 with respect to the first eight months of 2008 were Switzerland (+35% with sales for 12.5 billion euros), Turkey, which is worth as much as China for us (+22% to 6.3 billion), Israel (+22% to 1.5 billion), Taiwan (+27% to 751 million), Indonesia (+18% to 473 million), Malaysia (+18% to 552 million), Argentina (+16% to 700 million) and Mexico (+11% to 2.1 billion).

Toward the United States, Italy has practically reacquired the precrisis export levels (-1% to 15 billion), while it has improved on them toward Japan (+8% to 3 billion). Exports held their ground fairly well on other markets like Saudi Arabia, Algeria and Egypt (while the Libyan market fell sharply on account of the conflict that paralyzed the country).

Italy's exports to countries in the EU were much less active over the three-year period. We have recovered the export levels of the first eight months of 2008 in only a few of them, obtaining slight increases in the same period of 2011.

Among these countries was Germany, that is still Italy's main export market worth 31.1 billion euros (+3%), immediately followed by France (+1% to 27.4 billion). Sales to the other EU economies were strongly negative, especially in those countries where the real estate/financial crisis and difficulties caused by sovereign debt wreaked the heaviest damage: the UK (-14% in the first eight months of 2011 compared with the same period of 2008), Spain (-22%), Greece (-38%) and Ireland (-39%).

As far as the products are concerned, compared with the period January-August 2008 there was a sharp increase in the same period of 2011 for Italian exports of a large number of products in the automation-mechanical sector (measuring instruments, rolling stock, metallic structures for ships and floating structures, industrial robots, weapons, X-ray machines and electro medical equipment, machines for the petrochemical industries, packing and food processing machinery, textile machinery, machines for leather, paper, wire and cables, aircraft, etc.), in the food and beverage sector (beer, wines, sparkling wines, bakery products, chocolate and candy, crisp breads, fresh pastry, ice cream, condiments and spices, deli meats, cheese and other dairy products, fresh vegetables, processed fruit and vegetables, prepared dishes, etc.), and in the apparel-fashion sector (especially eyewear and frames, leather apparel, leather goods, watches, cosmetics and footwear).

The situation for exports of products connected with construction and the home continued to be slow, due to the persistent world crisis of building construction and the consequent decreased demand for those products where, however, Italy remains among the leaders at the international level. In the first eight months of 2011 exports were still sharply down compared with the same period of 2008 in sectors like furniture, taps and valves, ceramic tiles and heating systems.

2012 does not look rosy for Italian industry. The measures of fiscal austerity adopted by the country will further hinder domestic demand. And the recession expected at the international level will probably generate an inevitable slowing of exports, despite the brilliant recovery exhibited in 2011.

*vice president of the Edison Foundation and professor of industrial economics at the Università Cattolica di Milano.