For the industrial sector, during the second half of 2011, another recession came. Industry as a whole resisted until the third quarter with a stagnation of value added at constant prices (-0,1%), before undergoing a large contraction in the fourth (-2,2%). In fact, the year-end recession is entirely industrial, considering that services as a whole still held up (-0,1% in the fourth quarter compared to the previous one). Also considering the decidedly unfavorable trends that emerged in the first few months of the year, it can be stated that the second quarter of 2012 saw the completion of a full year of contraction for the industry.
The real peculiarity of the current crisis lies not so much in its intensity in absolute terms, but mainly in the fact that it began with production levels still well below the previous highs. This feature confirms that the output losses of recent years are largely of a "definitive" nature, unrelated to the trend of the economic cycle.
The slightness of the recent recovery compared to the size of the previous fall is to a large extent a peculiar trait of our country, which has lost positions compared to the other major European economies. Furthermore, our gap compared to other countries in terms of the trend of industrial activity can only widen in a phase like the current one, considering that the Italian economy is undergoing, together with the other economies of the European periphery, a specific shock, which determines therefore an increase in distances compared to other countries.
Even during the first few months of the year, the economic indicators confirm our greatest difficulties. Indeed, according to economic surveys, the euro area as a whole has begun to reverse its trend.
On the other hand, the surveys conducted by Istat showed for Italy an adjustment of the confidence climate of industry to its lowest levels from December to March, with a slight improvement in expectations on order and production trends. On the positive side, we note the fact that companies do not report excess inventories in warehouses. The fact of having a cycle that is out of phase with respect to other economies is a logical consequence of the characteristics of the crisis that has hit our economy, essentially translated into a phase of fall in domestic demand.
The fact that the international context is starting to recover could help us limit the damage of the crisis, to the extent that companies manage to expand exports in the coming months. Net exports already played a decisive role in 2011, considering that exports at constant national accounting prices increased by 6%, while imports grew by only 1%.
In 2011, therefore, the accounting contribution of net exports to growth was large, by almost one and a half percentage points, and offset the effects on growth of the fall in domestic demand, above all following the largely negative contribution of the change in inventories to GDP growth. It is also interesting to observe how during the two-year period 2010-2011 Italy, for the first time since the launch of the euro, closed the gap in the growth of its exports compared to the euro area average.
However, other aspects which characterize the composition of demand play against the industrial activity. In particular, the collapse of investments in machinery should be noted, with a contraction of almost 5% at the end of the year, and the drop in domestic consumption, which was decidedly more pronounced for goods (-0,7% in the third, -2% in the fourth quarter) compared to services, up slightly in both quarters (by 0,1 and 0,3% respectively).
There is the risk that companies will reorganize themselves by adapting to new, permanently lower production levels, through restructuring or even outright closures of factories. The output losses would thus become permanent in nature.
According to national accounting data, the crisis of the last two years has led to a collapse in the margins of companies, which have not managed to transfer the increases in unit costs entirely onto product prices, supported above all by the increases in the prices of raw materials. Firms' difficulties in raising prices are a result of the phase of low final demand as well as competitive pressures from outside. The worsening profitability of the industry is a clear sign of trouble.
In this phase, bank policies have necessarily become more selective. There is therefore in this phase a pressing need for the corporate system to minimize the liquidity requirement. If we add to this the slack that is re-forming as a result of the recession, we understand the collapse in investment observed in the fourth quarter of 2011. On the other hand, since in many cases the plants are largely underutilised, this cannot in its time negatively affect productivity.
Industry recorded significant job losses between 2008 and 2009, around 700 thousand if we reason in terms of work units, with a drop in the incidence of industrial employment on total Italian employment. The losses were lower when looking at the "heads", around 400 fewer workers in industry in the strict sense, but only because the hours worked per employee fell, both due to the increase in the incidence of part-time work and due to the of workers in the Redundancy Fund. This means that the spaces for absorbing a new crisis through the reduction of hours worked per employee are limited today.
The beginning of a new phase of employment reduction would pave the way for a real deindustrialization of the country, with effects also on the long-term productive potential. The formation of a stock of long-term unemployed is in fact the probable consequence of a period of mass expulsion of employed people from the productive circuit. The consequences of this scenario appear to be able to condition the trend in wage dynamics. A first deceleration emerged in 2011 and probably a phase of wage moderation could also take place in the two-year period 2012-2013.
The deceleration of wages underway in Italy overlaps with an opposite trend in the more dynamic countries of the euro area. The opening of a differential in wage growth supports, on the one hand, the divergence in the dynamics of domestic demand between the countries of the euro area, with positive consequences for the weaker countries which must try to export towards economies undergoing a better cyclical phase. However, the opening of a growth differential between Italian and German wages may not be sufficient to substantially change the competitiveness of the industrial system on the cost side, as long as our productivity continues to stagnate, in the face of the decidedly more dynamic found in the German industry. The recession only aggravates the situation as it determines, as we have seen, a divergent trend in investments. The investments of Italian industry are falling, marking the formation of a delay in the technological upgrading phase of our production system, and this can only widen the distances with respect to the economies in which companies are investing.
