Forward slowly, almost stopped. The harsh data of the Italian economy, relating to industrial production and employment, reaffirm that the recovery from the deep hole dug by the recession is very slow and is also marked by backsliding, rather than the expected gradual consolidation. The disconnect from the more marked progress of the qualitative indicators is worrying. The latter seem to have lost part of their reporting value, perhaps due to the differences in performance between companies, with those in greater difficulty leaving the economic radar monitor. The gap between soft and hard stats is likely to close in the first half of 2014; the risk is that this occurs not only through greater real momentum but also via a worsening of expectations, as is already being observed in some variables. On the other hand, discouragement is easily fueled by uncertainty from high unemployment and low utilization of plants, while productive activity is held down by credit crunch, weakness in domestic demand, accumulated loss of competitiveness.
These last three are the factors on which it is urgent to act to avoid further damage to Italy's economic system. Because it is clear that the improvement of the international context, which continues, is necessary but not sufficient. In fact, fears of a setback by the USA (which used all the levers of economic policy much better) and of a crisis in the emerging markets are exaggerated: both will continue to give solid impulses to global growth. Just as a helping hand comes from the greater vigor that the Eurozone is acquiring. The pressure on prices remains downwards and this does not facilitate the elimination of imbalances, also because it keeps real interest rates high, despite the fact that nominal rates continue to fall in the most difficult countries of the single currency. The euro exchange rate is in the upper part of the ideal band within which it has been fluctuating for some years and this does not favor the easing of financial conditions.
Attachments: CF February 2014.pdf
