Report on recent economic developments – October 2015

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The Report on Recent Economic Developments of October 2015 examines Italian and international economic conditions on the basis of the most recent indicators. The outturn for the first half of the year and the information available for the second point to GDP growth for 2015, adjusted for working days, of 0.8 per cent, with quarterly increases of 0.3 per cent in the third and fourth quarters. On an unadjusted basis, i.e. excluding calendar effects, the rise could be close to the 0.9 per cent forecast in the Update to the Economic and Financial Document. Positive signals have been coming from the labour market, which has displayed considerable sensitivity to the economic cycle. The data indicate that, contrary to past experience, firms are responding to the recovery with “more people” instead of “more hours”. The reduction in workforces after two consecutive recessions and the greater attractiveness of hiring, thanks to contribution relief, could explain this phenomenon.


The general confirmation of growth forecasts for the current year is accompanied by an increase in risk, especially looking forward. The slowdown in the emerging economies has been confirmed. The advanced countries are continuing to recover under the impulse of domestic demand, but have been affected by the slower growth in global economic activity. Inflation is compressed by external depressionary factors, complicating the conduct of monetary policy. In this context, forecasters have revised their projections for international growth downwards. Forecasts for world trade growth are currently below the estimates adopted by the Government in the Update (3 per cent in 2015 and 4.5 per cent in 2016). These corrections do not jeopardise the European and Italian recovery, but indicate that its pace will be slower.


The moderate recovery in Italy has also been driven by domestic demand. Export performance was positive in the first half of 2015, but is now showing signs of slackening due to the decline in sales in the emerging markets. Manufacturing industry, which sustained the cyclical recovery in the first half, is especially exposed to the international slowdown. Furthermore, the recovery in this sector is highly concentrated in a few segments of activity. Excluding the two fastest growing sectors (motor vehicles and energy, or 15 per cent of industry), manufacturing is not in fact expanding. If growth in those sectors should slow (for example, owing to the repercussions of the Volkswagen scandal), industry and the entire economy could be affected.


Inflation remains at levels close to zero owing to the decline in oil prices and moderate growth in consumption. The pressures towards low inflation are widespread within the basket of consumption goods used to measure inflation: a third of all goods and services is in deflation, while the prices of almost half are rising by less than 0.5 per cent and about two-thirds are rising by less than 1 per cent.


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