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2Q Results Depress Italy’s Machine Tool Outlook

The future seems to be getting less positive for Italian machine tool builders, as second-quarter domestic orders and exports declined sharply. In so doing, orders failed to maintain the positive results that closed out 2011 and carried into the first quarter of 2012. UCIMU, the trade group that represents Italy’s manufacturing technology developers and suppliers, reported a 20.6% decrease in orders versus the second quarter of 2011.

Until now, strong demand from other countries had kept the Italian machine tool builders in growth mode. But, UCIMU has warned in recent months that slack demand from the home market was a concern for its members, and a dire sign for the country’s industrial sector in general.

Now, the organization reports that its index for domestic orders shows a 11.5% decrease for the second quarter of 2012, compared with 2Q 2011. This result demonstrates a domestic demand weakness that UCIMU calls “a structural crisis of the Italian market, which has drastically reduced its levels of investments in production technology.

As for the export market, the UCIMU order index for the second quarter of 2012 shows a 23% drop versus the April-June 2011 period.

“Italian manufacturers of machine tools are extremely worried about the current situation,” according to Luigi Galdabini, UCIMU president. “What is even more alarming is the trend of internal demand, which reduction has now become structural.

“However,” he continued, “although significant, the decrease in export orders is still acceptable, if we consider that it is compared with the great results obtained during the second quarter of 2011.”

The group is standing by its recent forecast for a 12.3% annual increase in machine tool orders for 2012, versus 2011, made in conjunction with its annual meeting in June. Galbadini said its outlook makes it difficult to accept new Italian government austerity policies that would eliminate funding to promote exports of Italian manufacturing equipment. The association officially requested an abatement of the policy in an effort to encourage more Italian manufacturers to take advantage of global demand.

Also, in regard to weak domestic demand, UCIMU is seeking “immediate and direct intervention” by the Italian government to maintain competitiveness.

“Considering how serious the situation is, and the de-industrialization risk for the country, which has stopped renovating its manufacturing structures,” Galdabini said, “the government authorities should plan the introduction of a decisive measure, like a detraction from the taxable income equal to 50% of the value of investments on new machinery. However, and being aware that in a period of cost reduction this may not be a sustainable measure for the government treasury, manufacturers ask at least for the introduction of free depreciation of capital goods. This measure, which would allow users to distribute the depreciation of the purchased goods over shorter periods, in the medium term would have no impact whatsoever on the state treasury, as the taxes due would simply be postponed.”

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