Industrial output in Italy rebounded much more strongly than expected in May after collapsing in the previous two months due to a coronavirus lockdown, data showed on Friday, and the economy minister forecast further gains in June and July.

National statistics institute (ISTAT) reported a production increase of 42.1% in May from the month before, almost doubling the median forecast of a 22.8% rise in a Reuters survey of analysts.

May’s data followed a drop of 20.5% in April (revised from -19.1%), and a record decline of 28.4% in March.

“It’s a very encouraging result,” Economy Minister Roberto Gualtieri said on Facebook. The ministry expects the output recovery “will continue, though probably at a slower rate, in June and July,” he said.

On a workday-adjusted, year-on-year basis, output in the euro zone’s third largest economy was still down 20.3% in May, following a 43.4% fall in April and a 29.4% drop in March.

The lockdown, imposed to try to contain Italy’s severe COVID-19 outbreak, shuttered most firms during March and April, and was lifted in May.

In the three months to May, industrial output was down 29.9% compared with the December-to-February period. Production recovered across the board in May, ISTAT said. Output of consumer goods, investment goods and intermediate goods all leapt from the month before, while energy products posted a more modest increase.

Italian gross domestic product shrank by 5.3% in the first quarter from the previous three months, the steepest GDP fall since ISTAT’s current series began in 1995.

The government of the anti-establishment 5-Star Movement and the centre-left Democratic Party forecasts a full-year 2020 GDP fall of 8%, but most forecasters expect an even steeper decline.

During a steep double dip recession between 2008 and 2013, Italian industrial output fell by around a quarter.

It regained only a small part of that during a modest recovery in the subsequent years, which has now been shattered by the coronavirus emergency.

The Italian economy, brought to its knees by the coronavirus, will contract by around 9.5% this year, the Bank of Italy said on Friday, revising down a forecast of -9.2% made last month.

It its latest economic projections the central bank forecast a partial rebound next year, when gross domestic product is seen rising by 4.8%, unchanged from its June 5 projection.

“The recovery will be gradual,” the bank said, warning there would be “lasting effects on family consumption due to the decline in employment and disposable income.”

The central bank estimated in its quarterly bulletin that gross domestic product fell around 10% in the second quarter from the previous three months, but said it would pick up to some extent over the second half of the year.

National statistics bureau ISTAT will publish preliminary second quarter GDP data on July 31. The first quarter registered a drop of 5.3% from the previous quarter, the steepest decline since ISTAT’s current series began in 1995.

Industrial output rebounded much more strongly than expected in May after collapsing in the previous two months due to the coronavirus lockdown, ISTAT reported earlier on Friday. The economy minister forecast further gains in June and July.

The lockdown shuttered most firms during March and April, and was lifted in May. The government of the anti-establishment 5-Star Movement and the centre-left Democratic Party officially forecasts a full-year 2020 GDP fall of 8%, though Economy Minister Roberto Gualtieri has said this will probably have to be revised down.

Italian banks lent a net 23 billion euros to non-financial businesses in the three months through May, the Bank of Italy bulletin said, pushing the lending growth rate to 11.5% compared with a contraction of 0.3% in February.

The credit expansion had been supported by government and European Central Bank measures, the bulletin said.

Italian stocks pulled Europe out of early losses on Friday as data pointed to a strong rebound in May industrial output, but a spike in coronavirus cases globally continued to weigh on investor sentiment.

The pan-European STOXX 600 rose 0.4% after starting the day lower.

Milan stocks jumped 0.7% as Italy reported a rise in production of 42.1% in May from the month before, almost double of what economists were predicting.

Reuters