Confindutria: “Inflation still too high, rate cut in June”

Italy’s growth “slows down” at the beginning of 2024 and a “weak” GDP trend is expected in the first quarter, even if services are “moderately rising” and industry “seems to stabilize”. This was revealed by the research center of Confindustria in the flash economic situation of March. “The Italian economy – observes the CSC – is supported by low inflation, increasing family confidence and growing services, while industry seems to stabilize. However, there are various negative factors: it continues the brake on trade flows in the Suez Canal, oil continues to rise in price, the rate cut is postponed again, credit to businesses remains in decline”. However, according to Confindustria, the prospects for 2024 are “better”. “If last year the Italian economy grew by 1%, a much higher pace than we were used to in pre-Covid, despite the ECB tightening, and also thanks to the Pnrr, the forecasts for 2024, so far modest (the latest Consensus indicated +0.7% for GDP), can only be more positive, also because rates are expected to fall and the Pnrr to accelerate”.

For fixed investments, with the updated data, no further reductions can be seen during 2023. The “worst data – Confindustria continues to highlight – is the flat second quarter, while the first now records strong growth. In the data released previously ( December 2023), however, the first was weak, there was a collapse in the second and a small decline also in the third. Added to this was an unexpected leap in the fourth. As a result, investment growth in 2023 is now of +4.9% (of which +4.2% acquired by the third party), while before the revision the change acquired by the third party was +0.4%. Therefore, from almost stagnation to strong expansion”. On household consumption, however, the Confindustria experts explain, “the revision was minor, but still significant: +0.2% per quarter in the first half of 2023, especially relevant for the second half than in the data before the revision had a flat dynamic. In this case, the variation acquired in the third is unchanged, because Istat also revised the dynamics to the same extent and in the opposite direction in 2022. Public administration consumption was also revised upwards in 2023 , much more than private ones: on average, +0.3% per quarter in the first 3; the variation acquired in the third quarter rose from -0.4% to +1.1%, with an entire 2023 recording a +1.2%. We have therefore gone from a small decline in public spending to a sharp increase. Strong destocking of inventories. In the face of higher investments (+0.8 the greatest contribution to GDP in the first 3 quarters ) and also total consumption (+0.4), the revision has significantly lowered the dynamics of inventories (-1.0)”.