“2024 has opened with further risks for trade flows, due to the sharp reduction in transits in the Suez Canal due to attacks by the Yemeni Houti group”. It highlights it Confindustria in the Flash Economic Report. Gas and oil prices have not been affected so far, but remain high: in January 31 euros/mwh and 78 dollars/barrel.
At the end of 2023, Italian GDP may have fared better than expected: services and construction have restarted, but industry remains weak; inflation at its lowest, only in Italy. Rates could therefore remain high for a few more months. Low inflation in Italy, not yet in Europe. Italian inflation fell further in December (+0.6% per year, from +0.7%).
However, it jumped in Germany (+3.8% from +2.3%) and France (+4.1% from +3.9%), so much so that in the Eurozone average it rose to +2.9% ( from +2.4%). The gap is explained above all by the different trajectories of energy prices, which now fall much more in Italy (-24.7%) than in Europe (-6.7%), due to an adverse “base effect” in Germany ( where the Government had slowed them down a lot in December 2022). The core prices of goods and services also count, as they continue to slow down everywhere, but in Italy they have already returned to just below +3.0%, while in the Area they maintain a greater pace (+3.4%).
Expected rates to decline
Sovereign rates were not affected by the reforms concerning Europe (agreement on the Stability Pact, failure to ratify the ESM): the Italian BTP in January was stable at 3.63%, the Bund at 2.14%; the spread remains at 149 points. This reflects lower expectations on central bank rates: the markets expect the FED rate to remain stable at the end of January (5.50%) and the first cut in March; even in the Eurozone, ECB rates are expected to remain stable this month (4.50%) and a cut in March-April.
The recent increase in inflation has therefore not dented the markets’ optimism, but may slow down the ECB’s moves. More expensive credit. In November, yet another increase in the cost of credit for Italian businesses (5.59% on average). Conversely, for the second month the fall in loans moderates (-4.8% per year, from a minimum of -6.7% in September), although credit remains a factor slowing down investments and consumption. Less negative investments. The qualitative data point to a less unfavorable dynamic in the 4th quarter, after the decline in the 3rd: the conditions for investing improve but remain negative (-20.9% from -31.0%) and the forecast on spending on consumer goods capital (16.0%, from 11.1%); the question plays little in favor. In December, however, the confidence of companies in the sector drops.
Uncertain consumption
After a robust 3rd quarter, mixed signals on consumption in the 4th. Retail sales recovered in October-November (+0.6%), but those of food goods are weak; in December, family confidence rose again, ICC recorded an annual +0.5%, but car sales slowed down (-3.7%). Work is growing. The positive dynamics of the labor market is confirmed: +450 thousand employed in November from the end of 2022. The growth in October-November (+122 thousand) is entirely attributable to permanent workers (+0.9%, +143 thousand); determined (-0.3%) and independent (-0.3%) decline. Upward services. In October and November RTT (CSC-TeamSystem) indicates a recovery of activity in services and in December, according to the HCOB PMI, the decline was almost canceled out (49.8, from 49.5), a figure consistent with the strong rebound in business confidence at the end of the year, especially those in tourism. Industry: sharp decline. In November, production suffered another sharp decline (-1.5%; -3.1% yoy); the increase in turnover reported by RTT is explained by a large destocking of inventories. In the 4th quarter, the acquired change in production was -1.1%. The HCOB PMI recovered slightly (45.3 from 44.4) anticipates an improving December, but business confidence continued its decreasing trend. And at the beginning of 2024 the Suez “blockage” (if prolonged) could worsen the scenario.
Eurozone: divergent rhythms
The decline in industrial production in November (-0.3%), third in a row, hides different dynamics: Italy and Germany (-0.3%) are suffering, the performance of Spain (+1.1%) and France (+ 0.5%). The weakness of manufacturing indicates a very weak Eurozone dynamic in the 4th quarter, given that services are also contracting (PMI in December at 48.8). USA slowing down? In November (+0.2%) and December (+0.1%) industrial production recovered slightly, after the decline in October (-0.8%), resulting in a negative 4th quarter (-0.8% ). And in December the Chicago Purchasing Managers’ Index and the Manufacturing PMI fell (47.9 from 49.4), only the ISM improved. But jobs have started to grow again at a high rate (494 thousand in the 4th quarter), supporting consumption. China is doing well. The economy accelerates in the 4th quarter, above expectations, especially due to the improvement in consumption. In November, industrial production recorded the highest growth of 2023 (+6.6% per year), driven by cars (+20.7%); indicators point to a further jump in December. Expectations for 2024 remain cautious, consistent with hiring by businesses that has been declining for four months.
– Photo: Fotogramma Agency –
(ITALPRESS).