Emilia-Romagna, industry and exports fall and production chains move to China

There are three interesting data emerging from the Economic Survey on the first months of the year and prospects for 2024 presented by Confindustria and Unioncamere Emilia-Romagna with Intesa Sanpaolo. The first datum is that even the solid manufacturing industry of the Via Emilia is unable to keep up with the great weakness and uncertainty of the global economy, and that couple of decimals of a point ahead of national trends (+1.2% of GDP is expected this year and +1.4% in 2025) are not enough to avoid sequences of minus signs on production (-3.7%), sales (-3.5%) and exports (-3%) in the first quarter of 2024. The second datum is that companies are putting the brakes on investments not so much and not only because the Transition 5.0 decree is lacking and because of the fog on global markets, but because they cannot find the technical figures needed to make the new technologies work: out of 54,000 job openings expected today by companies in the region, more than half are profiles that cannot be found: for blue collar workers, process technicians and carpenters the percentage gap between demand and supply has exceeded 80%. The third datum is that in a historical phase in which reshoring and the rapprochement of production chains is extolled as a reaction to protectionism and conflicts, less than 5% of companies have so far modified their supply chains (67% of companies with more than 50 employees have foreign partners, a percentage that drops to 13% in the craft sector) and that all sectors and all size classes in Emilia-Romagna are now investing in Chinese suppliers.

"China is lowering its prices monstrously, steel costs half as much as in Europe, and the Chinese market is recovering well and needs to replace with Europeans the turnover so far achieved with US partners, who are literally dismantling their factories in China to reassemble them in Vietnam and neighbouring countries," explains Alessandro Malavolti, Confindustria Emilia-Romagna's delegate for internationalisation.

The 658 million euro in exports lost in the first three months of 2024 by Emilia-Romagna (more than half of which are mechanical) and the overtaking of the United States over Germany as the leading trade partner are not, however, a wake-up call: "We have gone from the years 2020-2023 of strong expansion to the sharp slowdown in the last quarter of 2023, which continued in the first months of 2024, but we are now reading signs of positivity and expect a recovery from next autumn and even more in 2025," assures Malavolti, recalling that the region is suffering from the effects of "the great sickness Germany, which takes a couple of years to change paradigm," in addition to weak domestic demand, the delay of incentives 5.0 incentives and energy costs that are still too high compared to competitors not only outside the EU, but also to our neighbours Spain (which pays a quarter of us for electricity) and France (a third).

"The current slowdown phase, which started as early as the second half of 2023, is still ongoing, but the good news is that the braking factors are easing: on the one hand inflation is fluctuating around 1% in Italy today (in Europe it is below 2.5% with expectations of a reduction to 2%), on the other hand we expect that interest rates, already cut by 25 basis points, will fall by a total of 150 basis points by mid-2025 and this will have positive effects for the recovery of investments in durable goods, which are the specialisation of Emilia-Romagna," points out Giovanni Foresti, head of Intesa Sanpaolo's research office. According to the sample survey on the Emilia-Romagna territory conducted by the banking research centre, a recovery in consumption and household income is expected between now and 2025 (+1.5% in 2024 and +2.5% in 2025) and a recovery also in foreign competitiveness with an average annual trend of +2.8% in exports, including mechanics. "The factor that induces us to be optimistic," adds Foresti, "beyond the global PMI index that has returned to positive ground, is that over the last twenty years the region's manufacturing companies have strengthened a great deal in terms of assets, the weight of equity on assets, which was 14% in 2020, now exceeds 33%, and liquidity has also doubled. A long-term dynamic that therefore dampens the magnitude of negative economic data, which see loans to businesses falling again in the first quarter of 2024, "-5.1% year-on-year and -4.8% for industrial companies," points out Alessandra Florio, Intesa San Paolo's Emilia-Romagna and Marche Director, "but a clear improvement on the -7.4% drop last December.

"We knew from the second half of 2023 that orders were not good, but our companies all have excellent balance sheets behind them, balance sheets built up in the past. Our strength, however, is not in question, it is unexpressed,' intervenes Valerio Veronesi, president of the regional Unioncamere, 'because 50% of the figures we are looking for we cannot find, and at the same time we have the female gender that too often detaches itself from work due to maternity: we must offer more support and services to push the birth rate and women's stay at work. And we need to retain and bring back our young people from abroad; with the Region we have started a very good job in this regard thanks to the Talent Law. Finally, we are a people of savers, the most virtuous along with the Japanese, but we must ensure that we channel some of that savings from the banks to businesses'.