Bankitalia: Lombardy is no longer the locomotive of Italy. Governor Fontana: incredible, and who would be?

The economy of Lombardy has ceased to be the locomotive of Italy. The autumn update of Banca d'Italia indicates a strong slowdown. The region's GDP is growing, but only moderately. The estimated gross domestic product is +0.4% and is in line with the national trend. There are no signs of recession, but the weakness of 2023 and the first part of 2024 continued in the third quarter of the year. Weighed down by industry, whose production fell by -1.2 % in the first half of 2024, with the weakness of both domestic and foreign demand. In general, exports continued to decline (-0.3%).

The Bank of Italy's periodic survey revealed a drop in turnover in the first nine months of the year and companies expect sales to stabilise in the next six months. A decrease in investment spending in 2024 is confirmed and the decline will extend to 2025. Production activity in the construction sector has slowed down; the downsizing of tax incentives for increasing energy efficiency has been partly offset by the recovery of public works supported by the start of the National Recovery and Resilience Plan (NRPR) construction sites. The resources allocated so far amount to 12 billion. And they affect infrastructure in particular. If spent all of them, they would have 'an important effect' on the region's GDP, it was pointed out during the presentation of the survey.

On the other hand, growth remained strong in the services sector, especially in those sectors that benefited from the increase in tourist flows. The growth in spending by foreign tourists in the first half of the year was 19.2%, according to the Bank of Italy's survey on international tourism. "The growth trend in arrivals and presences is more accelerated than the Italian average" and "is particularly concentrated on Milan," it was explained.

As for household income, it started to rise again (2.7% in real terms in the first half of the year), also benefiting from the increase in wages linked to contractual renewals. The recent trend has, however, only compensated for the loss of purchasing power suffered in the previous two years, and consumption has stagnated (0.3% in real terms compared to the first half of last year). Bank deposits shrank while loans returned to growth. Finally, employment continued to grow (1.2% in the first half of the year compared to the corresponding period) and the unemployment rate dropped to a particularly low level (3.9%). However, signs of a change in labour market conditions began to appear. Hours worked in industry decreased and the Wage Guarantee Fund increased.

fter about four years of substantial stability, the cyclical slowdown led to a resurgence of default rates on corporate debt in Lombardy: in the first half of 2024, the flow of new impaired loans amounted to EUR 2.2 billion (EUR 1.4 billion in both the first and second half of 2023). In the average of the four quarters ending June, the deterioration rate was 1.8 per cent (1.3 per cent in 2023). This is a 'first signal', according to the Bank of Italy, which will not necessarily translate into further deterioration but which is 'consistent with a cyclical framework of strong slowdown'.