La monetary tightening continues to impact the cost of credit. It's the one who says it Bank of Italy in its Quarterly economic bulletin. “The decline in loans to businesses continues, albeit easing; contributing not only to a modest demand for financing, due to high interest rates and the weakness of investments, but also restrictive offering criteria due to the widespread perception of risk". In detail, the via Nazionale economists point out how business loans continued to contract in May (-1,1% over the three months and on an annual basis), albeit less intensely than in February. The decline remains more marked for construction and manufacturing companies. The decrease of financing for families has attenuated (-0,5%); mortgages for home purchases have stagnated.
Bank of Italy, what the quarterly economic bulletin says
The quarterly document released by the Bank of Italy adds that according to the recent survey, again by Via Nazionale, on inflation expectations e business growth, it emerges that "the phase of tightening of credit access conditions underway since 2021 has been interrupted; conditions remained stable at restrictive levels and would remain unchanged also in the third quarter". Another observation by the economists of the Bank of Italy in the Economic Bulletin concerns the fact that the reduction in bank loans to companies has associated with one growth in gross bond issues, given the substantial stability of repayments: net issues amounted to 4,2 billion (from 1,1 in the fourth quarter of 2023). Net risk capital financing, however, was limited. In the second quarter, net issuance by non-financial corporations remained strong, according to preliminary data. Since mid-February, the yields on bonds of Italian non-financial companies have remained essentially unchanged.
Bank of Italy, inflation remains contained
"L 'consumer inflation it will be at moderate values, at 1,1 percent this year and just over 1,5 percent on average for the two-year period 2025-26". Bank of Italy states this in the Economic Bulletin, confirming the price estimates already released previously. “In recent months – we read in the Bulletin – overall inflation has remained at low values and the underlying component has reduced slightly. Disinflation was confirmed to be slower for services, due both to the components whose price lists adapt with delay to the trend of the general index, and to the items connected with tourism, for which demand remains high", states Via National.
Bank of Italy, tourism prices slow down the decline in inflation
- increases in the tourism sector in Italy they are “clearly superior” to the average inflation of services and contribute to slowing down the decline in prices taking place in our country which marks a + 1,1 %, therefore below the ECB's 2% target. The Bank of Italy states this in the economic bulletin according to which "also as a result of the recovery in demand, since the summer of 2022 in Italy inflation relating to tourist activities (accommodation, restaurants, holiday packages and transport) has been significantly higher than the average of services". A gap progressively reduced in the first six months of 2024, but which still remains positive.
Bank of Italy, Italian GDP forecast: +1,1% in 2026
“In the first quarter of this year – continues Bankitalia – the GDP recorded an expansion of 0,3 percent compared to the previous period. The main support for growth came from net foreign demand, due to both the increase in exports (0,6 percent, in particular those of business services) and the decline in imports (-1,7 percent). Household consumption began to rise again, recovering only part of the sharp decline of the previous quarter. The gross fixed investments slowed down: the increase in construction spending, still sustained but less marked compared to the last months of 2023, was associated with a sharp decrease in spending on plants, machinery and intangible assets. Finally, after having subtracted almost a point and a half from the product on average in 2023, the change in inventories once again provided a negative contribution to the GDP dynamics (-0,7 percentage points)".
“Based on our estimates, in the second quarter economic activity continued to increase at a moderate pace, still supported by the growth of services, in particular in the components linked to tourism, while the decline in manufacturing production continued. The added value of construction would have fallen, in connection with the reduction of tax benefits linked to the Superbonus. On the demand side, the continuation of the expansion of exports and the recovery of consumption would have been associated with a less favorable trend in investments. The Ita-coin indicator, which removes growth from economic volatility, remained at levels close to zero on average in the second quarter. Based on our most recent macroeconomic projections, output would increase by 0,6 percent in 2024 (0,8 without considering the adjustment for working days), 0,9 in 2025 and 1,1 in 2026."
In 2024, world trade in goods and services will increase by 2,2%.
The volume of global trade “grew at a modest pace in the first quarter. However, signs of strengthening are emerging: since April, global PMIs relating to new foreign orders have increased, placing themselves above the expansion threshold on average for the second quarter for the first time in over two years. Since May, maritime transport costs have risen again, exceeding the levels reached at the beginning of the year following the attacks by Houthi militias in the Red Sea; This trend was influenced by the growth of precautionary orders motivated by the fear that the continuation of the conflict in the Red Sea and the worsening of geopolitical tensions lead to service interruptions in summer, the peak transport season. Based on our estimates, world trade in goods and services will increase by 2,2 percent this year (from 0,6 in 2023), a slower pace than that recorded in the five years preceding the pandemic (3,2 percent) and to world product growth estimates for the current year".
Public accounts, for Italy towards EU procedure
“The European Commission has announced that will recommend the opening of excessive deficit procedures against five Euro Area countries, including Italy. In fact, for our country the Commission estimates that the ratio between deficit and GDP, although sharply contracting compared to 7,4% in 2023, will remain above the 3% threshold both in the current and next year". Bank of Italy notes this in the Economic Bulletin, reporting that in five months the PA requirement was approximately 72 billion, in line with that of the corresponding period of 2023, also influenced by the use as compensation of a large amount of tax credits for construction accrued in recent years, already accounted for in the deficit.
According to Istat estimates at the beginning of July, the deficit for the first quarter would have been 8,8% of GDP, down by almost 3 points on the year, reflecting the contraction in the impact of primary spending on GDP. In May, PA debt amounted to 2.919 billion, approximately 56 more than at the end of last year. In 2024 the debt would increase by almost 120 billion both according to the trend framework of the Def 2024 and in the most recent EU forecasts.
China's production overcapacity, EU dependence rises
“Recently the United States and the European Union announced increases in duties on imports of products related to the energy transition from China. These tariff measures were adopted in response to China's large public subsidies to support various manufacturing productions. In fact, these subsidies amplify the excess production capacity in China (overcapacity), which spills over into foreign markets with the offer of products at lower prices than those of competing companies. The issue of overcapacity calls into question interconnected issues: 1) the structural imbalances that characterize planned economies, such as China's; 2) the strengthening of the stimulus policies for the manufacturing sector adopted in China following the crisis in the real estate sector; 3) the country's dominant position in the production of green technologies and the underlying contribution of public subsidies. The Chinese growth model continues to present clear structural imbalances."
“The share of fixed investment in GDP is considerably higher than that observed not only in the major advanced economies, but also in others Rapidly growing emerging countries, such as Brazil or India. On the other hand, the share of consumption in the product is among the lowest in an international comparison. The combination of strong aggregate investments and weak consumption is reflected in a large trade surplus that has reached high levels compared to world GDP
Energy, gas prices on the rise due to lively Asian activity
“Il price of Brent recorded wide fluctuations. In April and May the prices had fallen thanks to the reducing the risks of an escalation of tensions between Iran and Israel; they subsequently rose again (to around 85 dollars a barrel), mainly affected by the decision of the countries adhering to the OPEC+ cartel to extend the voluntary production cuts agreed for 2025 and 2023 until 2024. According to the most recent projections of the IEA and the private analysts, the oil market would show a slight supply deficit for the second half of 2024“, underlines the Bank of Italy.
“The reference price of natural gas for European markets (Title transfer facility, Ttf) has risen again, above 30 euros per megawatt hour. Despite high inventories, prices were boosted by the liveliness of global activity, especially in Asia, as well as multiple technical factors, including the extension of maintenance work on Norwegian gas pipelines and the shutdown of some liquefied natural gas plants in Asia. Also contributing – continues Bank of Italy – is a greater energy demand for the air conditioning of buildings, connected with forecasts of heat waves in Europe and Asia”.
Pnrr, slower implementation in the South
In Italy “the achievement of qualitative and quantitative objectives set by the Pnrr for each semester it proceeds in line with what was agreed at European level", although "some critical issues emerge, especially in the South". The Bank of Italy notes this in a section of the Economic Bulletin. Based on the most updated data from the construction funds, highlights Bank of Italy, for 36 percent of the tenders announced by December 2023 the executive phase had started, the works were completed in 18 percent of cases, while for the remaining 18 they were still in progress. course, often with large delays compared to the estimated timescales.
“The progress of the works – it is underlined – is slower in the South. Most of the public works financed or co-financed by the Pnrr were connected to missions 2 and 33, which account for over 60 percent of the assignments and which also include projects already in existence and for which the Pnrr financed the completion. Most of the tenders, mostly those of medium-small size, were published by local public administrations and in particular by municipalities (79%). The central administrations instead managed only 6 percent of the tenders, which however - given their larger size - absorbed 41 percent of the total amount. Relative only to the tenders managed by the central administrations for which information on the executions is available, the works awarded and those already in progress represented respectively more than two thirds and more than half of the total amount put out for tender. Last December the EU Council approved the proposal for revision of the Plan by Italy, which led to the introduction of a new mission dedicated to interventions relating to the RepowerEu programme, to which over 11 billion have been allocated, and the partial or total definancing of some measures, for which Legislative Decree 19/2024 outlines alternative coverage" .