Csc: Israel-Iran war another shock, expectations worsen

Another shock. The already complex economic scenario is aggravated by the increase in oil prices due to the conflict between Israel and Iran. Italian industry held up at the beginning of the second quarter and indicators improved for services. But tariffs on exports and uncertainty are deteriorating confidence, a bad sign for consumption and investments. Expectations are worsening. Positive, however, is the continuation of the rate cut in the Eurozone.

This is the picture that emerges from the Congiuntura Flash note issued by the Confindustria Studies Centre, which has dedicated an in-depth study to the dollar and tariffs: the effects of the strong euro on the US currency add up to the effects of US tariffs on Eurozone exports. They effectively amount to a doubling of tariffs, set at 10%, bringing the 'total export barrier' above 20%. This trend could spread to other currencies, which could devalue, widening the negative effect on our exports.

Analysing the individual factors, the cost of energy is therefore rising (77$ per barrel, gas 40 euro mwh). For industry, stabilisation is at risk: production increased in April, +1.0%, making a good start to the second quarter (+0.4% in the first), but levels remain depressed. Tariffs risks are high and in May other indicators remain unfavourable, confidence barely recovers. Credit for households is increasing, +1.3% per year in April, while credit for businesses has a negative annual change (-0.8% from -1.1%). The cut in rates has translated into a fall in the cost of credit: 3.8% from 5.3% a year earlier.

For investments the expectation is for a slowdown: after the surprise of the first quarter, for the second quarter the indicators are weak. Uncertainty is high, orders for capital goods are negative, expectations for new orders fall for the second month.

Exports show a sharp slowdown. In April, it fell by 2.8 % due to the collapse of sales to non-EU countries, while sales to EU markets increased. The front-loading towards the US in March weighed heavily. Overall, however, the first four months of 2025 are still growing (+3.2% compared to the previous four months).