"In Italy economic activity increased modestly in the first quarter of 2024, still being held back by the decline in manufacturing, compared to a recovery in services". This is what emerges from Economic bulletin published today by Bank of Italy, according to which the crisis in the Red Sea will have a limited impact on inflation.
Bank of Italy confirms GDP estimates, inflation at 1,3% in 2024
In the document, Bankitalia underlines that the performance of economic activity is linked to "sluggish consumption, which would only partially recover the decline at the end of last year" while private investments would increase slightly "supported by self-financing".
Moving on to the percentages, in the Bulletin Via Nazionale confirms the GDP estimates, talking about growth of 0,6% (0,8% excluding the correction for working days), 1% in 2025 and 1,2% in 2026". We remind you that less than 24 hours ago, the International Monetary Fund forecast a GDP growth of 0,7% for Italy this year, while on Wednesday morning, the Study Center Confindustria has estimated growth of +2024% for 0,8.
Returning to the Bank of Italy, In 2024 inflation is estimated at 1,3%, while in 2025 and 2026 it will reach 1,7%. Core inflation, the most important data for the ECB, supported by the dynamics of unit labor costs, will instead reach 2% on average this year, falling to 1,7% in the next two years.
Loans to businesses for investments are decreasing
Bank loans to businesses are slowing down, in particular those intended for investments, record a new slowdown. “After increasing slightly in the last two months of 2023, loans to companies began to decline again (-3,3% in February, over three months and on an annual basis). The decline was particularly marked for those lasting more than 12 months, typically associated with investment needs“, explains Bankitalia in the Economic Bulletin, underlining that in comparison with 2023 the slowdown is more significant for businesses with fewer than 20 employees (-9,4%, compared to -3,3 for larger ones) and worsened in the manufacturing, the latter sector which, compared to the services sector, reacts more rapidly and more intensely to the trend in European Central Bank rates, also due to the greater use of variable rate loans and those with an original duration of less than one year .
Labour: “High profit margins absorb wage recovery”
In the private sector, profit margins “remain at levels higher than those before the health emergency, especially in private services; this would allow, together with the continuation of the decline in the prices of intermediate goods, to absorb the pressures on inflation resulting from theexpected acceleration of wages during 2024", we read in the report, which highlights how "contractual wages in the private sector accelerated in the first months of 2024, following the agreements reached in the chemical, wood and food sectors. The trade contract, which concerns almost 2 million workers, was also renewed in March. Over the course of the year, we read, “wage growth will continue to intensify progressively due to the expected renewals, in particular in tourism - where the national contract expired over two years ago - and in the metalworking sector, whose minimum wages will be increased in June in line with the inflation net of imported energy goods recorded in 2023 ″.
Bank of Italy: limited impact on inflation from the Red Sea crisis
The risks that the recent increase in costs of maritime transport linked to attacks on ships transiting the Red Sea “results in strong inflationary pressures in Europe appear at the moment limited“, writes the Bank of Italy.
“Even in a particularly pessimistic scenario, in which maritime freight rates stabilized at levels higher than the peak reached in April, there would be an increase in consumer inflation in the euro area equal to at most 0,3 percentage points ”, underlines Via Nazionale. “A less pessimistic scenario, in which freight rates returned to pre-tension levels by the second half of 2024, would induce an increase in consumer inflation of a maximum of 0,15 percentage points,” we read in the Bulletin.
