News Analysis: Italy auto sector gets good news, but overall economic impact still muted

Italy's auto sector had its best month in years in July, when production increased by more than a fifth compared to the same month last year, but economists say the benefits for the overall economy are indirect rather than direct.

According to the latest statistics, auto sales in July were 20.1 percent higher compared to July 2014. The year-on-year increase was nearly double the jump for the next strongest sector, energy, and enough that ISTAT, Italy's National Statistics Institute, called the auto sector a "steroid" with a big impact on overall industrial production, which rose 2.7 percent in July but would have been around zero growth if it didn't include auto production.

Italy's auto sector has just one major player, Turin-based Fiat, and there was a time when Fiat was such an industrial powerhouse that a jump like this would have had a major impact on overall economic growth projections and on the performance of the Italian Stock Exchange.

As recently as 1999, Italy produced 1.4 million cars, compared to around 400,000 last year when Spain, Britain, France and Germany all produced more than 2 million cards each.

"There's no doubt that a development like this is positive, but the auto sector isn't as important as it once was in Italy," Andrea Giuricin, a Milan-based economist and a fellow with the Bruno Leoni Institute think tank, told Xinhua. "It has implications for car resellers, parts makers, and so on. But the main implication may be about what is says about consumer confidence."

Because almost all car sales in Italy are to owners replacing an older vehicle, most consumers can delay new car purchases if they are unsure they can afford a newer model. According to Paolo Pietro Biancone, an economist wit the University of Turin, the fact that so many more decided to replace their old cars in July compared to the year before is a combination of several factors: growing confidence in the country's economy, the fact that sales last year were so low, and the fact that Fiat has new and attractive models on the market.

"After the home, a car is the second largest investment for most families," Biancone said in an interview. "There are many factors at play, and this is clearly good news for the economy. Let's see if it continues."

According to the polling firm Opinioni, consumer confidence levels are improving though not as dramatic as the automobile production levels. But that could change quickly. "Consumer confidence is prone to dramatic changes," Maria Rossi, Opinioni's co-founder, told Xinhua. "When there's enough good news more and more people will believe the economy has turned the corner. But that may still be months away, if it happens at all." Endit