Made in Italy

Manufacturing prospects, machine tool trends and macro-economic forecasts for Italy are outlined in this article.

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According to the European Commission, as of 1 January 2024, about 59 million people lived in Italy. The gross domestic product per inhabitant was EUR 33,000 in 2022. In 2022, most employees worked in manufacturing (21.7%), followed by wholesale and retail trade; repair of motor vehicles and motorcycles (19.3%), construction (8.9%) and accommodation and food service activities (8.8%). In 2024, in Italy, the occupational groups with the highest occurrence of shortage occupations were: stationary plant and machine operators, legal, social and cultural professionals and sales workers.

“The energy crisis triggered a slowdown in activity. Large fiscal support and gains in competitiveness helped real GDP to rebound to its pre-pandemic level by mid-2021, with unemployment reaching historically low levels. However, high inflation in the wake of the energy crisis has eroded real household incomes and the tightening of euro area monetary policy has led to rapid increases in borrowing costs for households, businesses and the government,” said the OECD, in its Economic Survey of Italy 2024’.

The Italian manufacturing sector is critical to its economy, with its strong global brand and reputation. It mostly includes small and medium enterprises with less than ten employees as well as global OEMS. The manufacturing sector has taken advantage of the technological transformations in the industry with the Industry 4.0 revolution. The Italian government has offered strong tax incentives to encourage manufacturers to embrace digitalisation and Industry 4.0.

Economic outlook

According to the OECD’s ‘Economic Survey of Italy 2024’, a strong fiscal policy response, enhanced competitiveness and improved banking sector health have supported growth in recent years. However, public debt is high and spending pressures come from population ageing, higher interest rates and the green and digital transitions. Steady fiscal consolidation is needed over several years to put debt on a more prudent path, said the OECD. 

“Regulatory barriers to competition in services should be reduced. Raising employment, including by expanding access to early childhood education to reduce barriers to female labour market participation, would make growth more inclusive. Additional policy efforts are needed to accelerate the reduction of greenhouse gas emissions and adapt to climate change. Renewable power generation has advanced, but complex permitting procedures that hold back the installation of renewable energy capacity need to be simplified,” said the OECD.

“The economy faces challenges from low productivity growth, low labour market participation, especially of women, and relatively high poverty. Transitioning to innovation-led growth, while strengthening inclusiveness, will require a comprehensive package of reforms. The ongoing civil justice and public administration reforms will be crucial to raise investment and productivity,” it continued.

In May 2024, the IMF (International Monetary Fund) projected growth in Italy to moderate over the next few years, with disinflation continuing. GDP was projected to rise by 0.7 per cent in 2024 and 2025 as accelerating NRRP-related spending—to be finalised by mid-2026—largely offsets the phasing out of Superbonus-boosted residential investment. 

The IMF expected a subsequent temporary growth slowdown in 2026 and 2027 as the NRRP is completed, with a more gradual slowing if the allowable spending period were extended. Thereafter, growth was expected to return to potential, which would increasingly reflect the shrinking national working-age population unless offset by rising productivity underpinned by effective structural reforms and investments, higher labour force participation and continued absorption of overseas workers. 

Machine tool orders

In the fourth quarter of 2024, the index of machine tool orders, compiled by UCIMU-SISTEMI PER PRODURRE (the Italian machine tool, robot and automation systems manufacturers’ association), showed an 11.4% increase compared to the period October-December 2023. 

On the domestic front, orders recorded a 33.3% upturn compared to the fourth quarter of 2023. Conversely, orders from outside Italy were down, recording a 6.5% drop compared to the same period in the previous year. 

“On an annual basis, order intake remained in negative territory registering -5.6% versus the 2023 figure with domestic orders at -3% and overseas orders at -7.5%,” confirmed the association. 

Riccardo Rosa, President of UCIMU, stated: "The overall outcome [of orders in 2024] is among the most disappointing in the last few years. Business in overseas markets, which flourished for a good part of the year, allowed us to limit the [shortfall].

“On the other hand, for the last quarter, the double-digit increase is good news as it also confirms the small trend reversal we had already recorded in the previous quarter. That said, concerns remain over the trend this year because, in addition to weak domestic demand (which is struggling to restart), there is a clear slowdown [in overseas business],” he added.

He highlighted areas of uncertainty in Italy, as well as abroad. With the United States as a key export market for Italian machine tools, tariffs are casting a long shadow. Geopolitical shifts in global markets, pointed out Rosa, also need to be taken into account.

“Germany's difficulties, Europe troubled by automotive issues, the closure of important markets such as Russia and the growing division of the world into two blocks with a China that is increasingly distant, are forcing companies in our sector to take new steps in terms of globalisation aimed at intensifying their presence in the countries of greatest interest. In this sense, the ‘Oficina Italiana de Promociòn Mexico’ initiative, launched by UCIMU in the second half of 2024, is an example of how representative organisations can support organisations in a market with high [growth] potential,” he continued.

Italian government Industry 4.0 incentives for machinery and systems conclude in 2025. Rosa urged the government to bring out a new industrial policy programme to further support the digital development of the Italian manufacturing industry.

To read the rest of this article in the April 2025 issue of ISMR, see https://joom.ag/b6jd/p34