Veneto East, Iran effect threatens weak growth
In the first quarter of 2026, production increased by +0.8% year-on-year, but the continuing conflict increases costs and undermines confidence
The Congiuntura dell'Industria del Veneto Orientale (final first quarter 2026 - forecasts April-September 2026) conducted by Confindustria Veneto Est, in collaboration with Fondazione Nord Est, on a sample of 754 manufacturing and service companies in the provinces of Padua, Treviso, Venice and Rovigo, photographs the first effects of a worsened scenario.
The trend
Data showed that manufacturing activity opened the year still up, although less strongly than in the previous period. But the conflict in the Middle East reduces growth expectations. In Q1 2026, production increased by +0.8% year-on-year (after +2.6% in Q4 2025), more marked for medium and large enterprises (+2.2) and engineering (+2.6%), supported by the precautionary build-up of inventories. Exports held steady before the conflict, at +0.2%. The impact of the war and the surge in energy and raw material prices, however, emerges in the sharp drop in production expectations, stable between April and September for 58.3% of companies, down for 25.2%.
On the sales front, industry turnover improved in the first quarter thanks to growth of 1.1% on the domestic market, and less (but still positive= on the foreign market (+0.2%), a synthesis of growth for the EU markets (+1.0%) and a decline for non-EU markets (-1.2%). Orders recorded a trend increase of 2.4%. Employment was almost stationary, but slowing down (-0.1%).
Peggioramento
The Gulf crisis that erupted at the end of February inflames the prices of raw materials, both energy and non-energy: the share of those who see them rising further in the first three months doubles to 64% (from 32.3), with peaks of 70.1% in the metal sector. Inflation is rising and the European Central Bank may raise rates again in June, so uncertainty reduces demand for credit: the cost of money is rising for 13.6% of companies, corporate liquidity is strained for 14.6%.
The prolonged conflict widens its impact on the economy. Oil remains overpriced, consumer prices and the expectation of a rate hike rise, confidence and expectations on industry, which was trying to recover, fall. The forecasts for April-September are mainly oriented towards maintaining production levels, but the share of those who expect a decrease (25.2%) increases by ten points, 16.5% an increase, compared to 58.3% who lean towards stability. Expectations on the trend of domestic orders are down for 35.5%, stable for 52.7%. Expectations on foreign demand are worse, down for 34.7% (from 17.7), stable for half of the companies and up for 15.2% (25.9% in the medium-large companies). 34.6% expect new hirings (50.1% in the medium-large).
