During 2017, the recovery in economic activity intensified and spread to all production sectors. In the manufacturing industry, production growth strengthened compared to 2016, supported by domestic and foreign demand. Exports of goods are once again expanding at a sustained pace. Information from Bank of Italy surveys confirms the picture of cyclical recovery, noting – for a large share of businesses – indications of growth in turnover in the first nine months of the year and expectations that foreshadow a further increase in production and orders in the coming months.
Companies have revised upwards the investments planned for the current year, already expected to increase compared to those made in 2016. In services, growth in turnover strengthened, especially in business services. In construction, activity showed the first signs of recovery in turnover and production, which went hand in hand with the expansion of sales and prices on the real estate market. Corporate profitability has further improved, also for construction companies, favoring an increase in the companies' liquid assets.
The expansion of economic activity was associated with a further improvement in labor market conditions, with an increase in employed persons, which have now exceeded pre-financial crisis levels, and a decrease in the unemployment rate. The available indicators suggest that these trends have had a positive effect on the economic conditions of households and on consumption. In the first half of 2017, the moderate growth of loans granted to the non-financial private sector continued, supported by supply conditions that remained relaxed.
The expansion of loans to households, to support spending for the purchase of durable consumer goods and homes, offset the slowdown in loans to businesses, whose demand for credit – despite the expansion in activity – remained weak, also due to the large liquid assets accumulated in the company balance sheets. The cyclical improvement had a positive effect on credit quality: the flow of new positions with repayment difficulties decreased, although the incidence of insolvencies remains high. Bank deposits held by households and businesses in Lombardy increased while the market value of securities held in custody remained unchanged.
The complete study is attached.
Attachments: Bank of Italy: the economy of Lombardy
