The recovery of the Italian economy continues in 2021, even if the contagions and the scarcity of some commodities remain factors of uncertainty. Household consumption is on the rise, while industry is giving way to services in dragging up the Italian GDP. Employment is recovering in the wake of the economic recovery. Inflation also rose in Italy, but almost only due to the rise in energy prices. Italian exports remain healthy, but expectations are more uncertain, because the Eurozone is slowing down and prospects are less solid in the US as well. This is the scenario outlined in the flash conjuncture of the Confindustria Study Center.
On the GDP front – highlights the report – after the strong rebound in the 2nd quarter (+ 2.7%), in the 3rd quarter the main indicators are holding up, despite the effects of the scarcity of some raw materials and semi-finished products and the recovery of contagions. Much uncertainty remains for the fourth quarter, linked to the continuation of the epidemic. However, 2021 could close with a recovery close to + 6.0%.
CONSUMPTION IN STRONG ASCENT – Private consumption, as expected, – Confindustria notes – restarted in the 2nd quarter (+12 billion, equal to + 5.0%), driven by spending on services (travel and out-of-home expenses). Expectations for the third quarter are for a further rise: approximately half of the extra savings accumulated by families during the lockdown remains to be spent, which in the spring the Confindustria Study Center had estimated at 26 billion. In August, domestic orders from consumer goods producers almost returned to pre-crisis levels and household confidence held up. Investments, in the meantime, continue their robust dynamics, after a + 2.4% in the spring which took them far beyond the pre-crisis values, with orders on an upward trend.
INDUSTRY GIVES STEP TO SERVICES – Industry, the main driver so far, is gradually passing the baton to services in driving growth. The PMI indices – reads the report – show a slowdown in industry in the last three months (60.9 in August from 62.3 in May) and an acceleration in services (58.0 from 53.1). This happens, in part, because the scarcity of some production inputs, which had already been worrying for some months, is starting to weigh on Italy too. Industrial production grew in the 2nd quarter a little less than the 1st (+ 1.2% vs + 1.5%) and the 3rd quarter started at a slower pace: in July there was a +0.8 % and the change acquired for the quarter is + 0.9%; then in August the expectations on production and orders fell. And partly, because there have been no other blocks for services: there has been a summer recovery in tourism, even if we are still far below the pre-Covid values and the confidence of service companies has lost very little in August. The sector’s recovery is expected to continue in the third quarter, given the rising business assessments, but with some shadows for the fourth quarter, given the sharp decline in order expectations in August.
INFLATION: ALMOST ONLY ENERGY – In recent months, inflation has also risen in Italy (+ 2.1% annually in August). In large part this – explains the CSC Confindustria – derives from the increase in energy prices (+ 19.8%), in the wake of the rise in oil prices in recent months. Inflation excluding energy and food is low (+ 0.6%), indicating that domestic pressures are moderate. So far, the Italian consumer prices do not read an impact of the increase in the prices of non-energy commodities, nor of their scarcity. This helps consumption, but compresses business margins. In the other Euro countries there is a trace of increases in industrial goods, but the greatest contribution to the rise comes from energy. The ECB continues to keep the hyper-expansive measures in place, thanks to which rates remain low: the BTP is at 0.71% in September, the spread with the Bund still at + 1.07%.
EXPORT STAY HEALTHY – Italian exports returned to growth in June (+ 0.4%), consolidating above pre-crisis levels (+ 0.7%). The recovery is heterogeneous between sectors and markets. In the second quarter of 2021 (compared to 2019) metal products, food, electronic-optical products are growing, while pharmaceuticals and textiles-clothing are down; sales to China, the Netherlands, Belgium and Germany are strongly expanding, negative to India, Japan, OPEC and Asean. The prospects for the third quarter are uncertain, according to foreign manufacturing orders: the PMI signals expansion, but in July-August the opinions of companies are slightly down. This reflects the lower expansion of world trade which, after returning to growth in June (+ 0.5%), sees a slowdown in the summer signaled by the global PMI.
SLOW DOWN THE EUROZONE – In the 2nd quarter, the GDP of the Euro Area grew more than expected (+ 2.0% against the 1.5% assumed by operators), thanks not only to the contribution of the Italian rebound, but also – Confindustria underlines – to that of Spain and France. On the other hand, German GDP growth turned out to be disappointing (+ 1.5%). Industrial production in the area in June decreased (-0.3%), mainly due to the third consecutive decline of the German one (-1.3%), which then rose again in July (+ 1.0%). The recent worsening of the Sentix indices (investor confidence), to 19.6 points in September from 22.2 and especially Zew (German business confidence), to 31.1 from 42.7, signals a slowdown in activity in 3 Th quarter.
LOWER SOLID OUTLOOK IN USA – In the US, GDP accelerated in the 2nd quarter (+ 6.6% annualized after + 6.3%), but less than expected. This slight disappointment – explains the report – is consistent with the worsening of indicators, on the business side (manufacturing PMI to 61.1 from 63.4; Chicago Purchasing Managers to 66.8 from 73.4; economic activity indices of the FED down) and that of consumers (University of Michigan index at 70.3 from 81.2). The manufacturing ISM is an exception (59.9 from 59.5). The slowdown in industry already seen in July (+ 6.6% annually from + 9.9%) could intensify in the following months.
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