Italian industrial output declined in February for the second consecutive month. Production declined by -0.5% compared to the previous month after a sharp -1.8% drop in January. On an annual basis Italian industrial output now registers at +2.5% – the smallest increase since April last year. In our view recent setbacks in economic sentiment and activity indicators do not constitute the beginning of the end of the current economic upswing. With economic momentum still proving very strong we interpret the current soft-patch as a gradually unfolding normalization of recent above-potential growth rates. Hence we continue to stick to our forecast for the Italian economy of +1.4% and +1.2% growth in 2018 and 2019 respectively. That the upswing in Italy is showing signs of cooling makes a swift solution to Italy’s political impasse and broad agreement to a growth boosting reform agenda all the more urgent.