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Confindustria, growth continues but is more moderate

2023-05-27T08:00:21.219Z

Highlights: The monthly analysis sees a second quarter driven by services. Italy's growth continued in the second quarter but at a more moderate pace. Inflation is persistent as expected, interest rates rise and loans fall. Mixed signals are coming from consumption, while investments are growing. In general, there is weakness on the Eurozone front, while industry is restarting in the US. China is slowing down, India is growing. This is what emerges from the monthly analysis on the economic situation carried out by the Confindustria study center.


The monthly analysis sees a second quarter driven by services (ANSA)


Italy's growth continued in the second quarter but at a more moderate pace, driven by services, while the situation in industry and construction was less solid.

Inflation is persistent as expected, interest rates rise and loans fall. Mixed signals are coming from consumption, while investments are growing, even if slightly. In general, there is weakness on the Eurozone front, while industry is restarting in the US. China is slowing down, India is growing. This is what emerges from the monthly analysis on the economic situation carried out by the Confindustria study center.

The 2nd quarter of 2023 opened with some weak signals for Italy, after the good performance of GDP at the beginning of the year, reports the analysis. The situation is solid in services, less so in industry and construction. The fall in gas prices is a powerful positive boost, but consumption remains weighed down by inflation, investment by the cost of credit and exports have stopped, given the global slowdown. Italian inflation stopped its decline in April (+8.2% year-on-year, from +7.6%), but the downward trend will continue, thanks to the increasingly falling gas price (34 euros/MWh in May) and the increasingly full effects of the rate hike.

Consumer food prices remain under pressure (+11.8%), but they too will gradually cool down because raw materials are expensive but without further increases (in April +49% from 2019). Consumer price dynamics for core goods and services continued to rise (+4.9%), incorporating past energy price increases. As for loans, the rate paid by Italian companies jumped to 4.30% in March, more than triple the level at the end of 2021 (1.18%). Credit at much more onerous conditions means that the stock of loans to companies is contracting more and more (-1% per year in March): therefore there is a lack of support for production and investment, reports Confindustria.

Services drive growth, with tourism in Italy in Q1 rising above 2022 levels (+30.7% spending by foreign travelers), reaching around those of 2019. The services PMI rose even further in April, indicating strong growth (57.6 from 55.7), although business confidence declined in May. The sector still benefits from pent-up household demand freed from post-Covid reopenings. On the industrial front, production fell again in March (-0.6%), the third consecutive decline, but closed the 1st quarter only slightly negative (-0.1%) thanks to the good legacy of December. However, the scenario is worsening: the PMI in April fell sharply in the contraction area (46.8 from 51.1). In May, business confidence fell again: fewer orders, lower production expectations. Foreign demand is no longer pulling: Italian exports of goods stopped, on average, in the 1st quarter of 2023. Mixed signals are coming from consumption. In March, the decline in food sales continued (-0.7%, in volume), while car registrations resumed since the beginning of the year, thanks to favorable demand after many months of contraction (+9.7% in the first 4 months).

A positive factor is the labor market, which remained expanding in Q1 (+80,0 employed). For April, however, the ICC reports a slight growth in consumption (+2.4% year-on-year), driven only by services (+5.4%). And in May, households' assessments of their economic situation worsened somewhat, as did confidence in general. Investment is growing, albeit slightly, in a scenario of weakness in the Eurozone. Euro zone industrial production slipped in March (-1.1%), bringing the 0st quarter into negative (-2.0%). In particular, manufacturing fell (-7.1% in the 2021st), which remained below the values of the beginning of 0: since then, the gap in Italy (+1.1%) is slightly positive, but the gap accumulated in Germany (-3.44%), which has slipped into technical recession, is wide. The manufacturing PMI fell to 6.<> in April, indicating a more slowdown, offset by growth in services.

Source: ansa

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