Stagnation risks increase at the end of the year: industry is in decline, construction has stopped boosting, only services remain. With inflation persisting and at historic peaks, consumption will slow down even though it has so far been sustained by accumulated extra savings; interest rate hikes discourage investment and put a strain on company balance sheets. Demand also shows pessimistic indicators; After recovery, tourism may be lower in winter, as construction already did in summer. Even exports remain buoyant: in the euro area, trends are similar to those in Italy. In the US, growth forecasts for 2023 were reduced from +1.2% to +0.5%. This is the portrait of the economic forecast of the moment photographed by the report from the Center for Confindustria Studies.
Expected deceleration, therefore, towards the end of the year. The price of gas rose again in December (137 euros/mWh on average, compared to 96 in November), and the high cost of energy has been increasing costs for the last 12 months, mitigated, only in part, by government interventions. And the EU’s difficult negotiations over a price cap, proposed at an even higher level, “do not help”, say economists at viale dell’Astronomia. Crude oil fell sharply in December to $81 a barrel (from $91), driven by a well-supplied world market. The picture was complicated by the jump in interest rates and the rise in the cost of credit for Italian companies in October: 3.14% for SMEs from 1.74% at the beginning of 2022, 2.19% for large companies from 0, 76%. “A burden that will have a negative impact on investments,” continues the CSC Report.
The BTP, which had been falling since mid-October (3.49% in December, against a peak of 4.69%), recovered to 4.06% following the rate hike decided by the ECB on 15 December ( to 2.50%). The industry, therefore, “feels the pinch”: production suffered a second sharp drop in October (-1.0%, after -1.7% in September). They only kept capital goods, while selling the other sectors. The 4th quarter thus opens with a very negative acquired variation (-1.5%), heavier than that of the 3rd (-0.5%). Furthermore, the November PMI, although recovering, remained in a contractionary area (48.4 from 46.5) and business confidence has recovered “but is still compressed”. Construction is also down for the CSC. The fall in the 3rd quarter was strong: -1.3% investments, -2.2% production despite the sector coming from 6 quarters of strong expansion. Services, on the other hand, continued: the summer recovery of tourism and expenses with services (+3.1%) was decisive for the sector, the only one to grow in the 3rd quarter (+0.9%). For the 4th, the signs are improving and business confidence has recovered some ground, taking into account that the volumes of vehicles on the motorways are slightly below the values of 2019 (-0.2%).
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
