The Lombard economy is growing, more than the Italian one and in all productive sectors. To confirm the decisive role of the Lombard locomotive is the Bank of Italy annual report, created in collaboration with Prometeia. The document shows that in 2017 the expansion of the Lombardy economy was further consolidated and strengthened compared to previous years: GDP would have increased by 1,7 percent, according to Prometeia estimates. Activity grew in all the main productive sectors, favored by a strong increase in exports of goods, by the expansion of business investments and household consumption, by relaxed financing conditions. The improvement in the labor market has contributed to increasing the disposable income of households, which since 2014 have also benefited from an increase in wealth. The expansion of industrial and service activity continued also in the first quarter of 2018 and, in the business plans, capital accumulation should consolidate during the year.
However, there is a negative element: despite the good performance recorded in 2017, the preliminary data on GDP show that Lombardy has not yet recovered the accumulated gap in previous years with the main European regions similar to it in terms of economic and productive structure, such as Bavaria or Catalonia for example.
THE COMPANIES
In industry, production, which has been expanding since 2013, accelerated significantly in 2017 and the increase spread to all company size categories and almost all sectors. The most intense increases in activity recorded by larger companies in recent years have been associated with increases in productivity. Utilized productive capacity increased and firms increased capital accumulation, also taking advantage of the tax breaks provided for investments in new digital technologies. In construction, turnover began to show positive changes, accompanied by an improvement in the real estate market. In the tertiary sector, the expansion phase continued and strengthened, particularly marked in business services. The number of has grown startups innovations and indicators of firms' innovative activity have improved. Goods exports have increased at high rates and have started to recover shares in world trade.
The improvement in the economic and financial conditions of companies continued. The increase in profitability, which involved all sectors of economic activity, contributed to the growth of the self-financing capacity and to the further reduction of financial leverage. Bank lending has grown moderately, but their trends are still different: loans to manufacturing and service companies, to medium-large and financially more solid ones have increased. The demand for credit remained stable, benefiting from the improvement in the economic situation and the recovery in investments. The conditions for accessing credit remained relaxed overall, although supply policies remain marked by caution, as also evidenced by the pricing. The diversification of funding sources has increased, with greater recourse to the bond market.
THE LABOR MARKET
In 2017, the improvement in economic activity favored the continuation of the expansion in the number of employed persons and hours worked. The new employment relationships activated, net of terminations, were mainly fixed-term. The unemployment rate decreased significantly compared to 2016, together with a slight increase in the activity rate. Firms in the region used highly qualified personnel to a greater extent than the Italian average; urban areas have been a pole of attraction for graduates from other regions of the country.
THE FAMILIES
The improvement in the labor market favored the expansion of disposable income and household consumption in 2016 and, according to preliminary data, in 2017. The overall satisfaction of Lombard citizens with living conditions has recovered, in conjunction with a marked improvement in assessments of one's own economic resources.
Household credit continued to expand. The low level of interest rates and the offer of innovative and more flexible contracts, in a context of improvement in the real estate market, drove the disbursement of new loans for the purchase of homes, which remained at high levels. The choices for allocating household financial resources favored equity securities and managed savings instruments.
THE CREDIT
The banks continued the reorganization of the territorial network and distribution channels in order to recover efficiency. Against the further decline in the number of branches, the diffusion of innovative contact channels between banks and customers has strengthened. At the end of last year, almost all intermediaries also offered their services through digital platforms. In recent years, it has expanded significantly availability of tools dedicated to micro-payments or to money transfers with mode peer to peer.
The quality of credit disbursed to Lombard customers has improved. The incidence of new non-performing loans on total loans returned to pre-crisis values. While remaining high, the amount of problematic positions out of total loans decreased, thanks also to the intensification of operations for the disposal of non-performing loans from bank balance sheets and to the growth in value adjustments, which in the past year amounted to almost half of non-performing loans and over sixty per cent of non-performing loans.
PUBLIC FINANCE
In the three-year period 2014-16, the current expenditure of the Lombard local administrations decreased; the introduction of the balanced budget principle since 2016 has contributed only partially to support investment spending, still down in the Region and in the Provinces, against a slight increase in the Municipalities. The decline in the debt of Lombardy's local administrations continued, with a lower incidence on GDP than the Italian average.
