Foreign firms show greater confidence in the services sector. Uncertainty remains a factor

Higher expectations in the service sector, whilst orders from abroad are supporting industry, despite stocks being considered excessive. The outlook for trade is more cautious for the second half of the year, whilst employment expectations appear weak. This is the perception of large foreign companies operating in Italia, as recorded in August. These are companies with 250–1,200 employees which employ 1.3 million people in Italia, generate a turnover of 518 billion euros and produce an added value of 121 billion. They are being monitored for the first time by Confindustria’s Foreign Companies Barometer, which complements the Observatory’s Annual Report to gather ‘more promptly the economic climate, expectations and planned decisions of companies’.

The companies in the sample ‘account for – as the report states – 71.7 per cent of the workforce and generate 64.5 per cent of the value added of all foreign-controlled companies resident in Italia’. Among large resident firms, those under foreign control account for 26.6 per cent of the total, employ 32.1 per cent of the workforce and contribute 37.6 per cent of turnover and 36.3 per cent of value added. Not to mention, according to the OIE Report’s supply chain estimates, the indirect impact on the market. This means that monitoring the climate and prospects in this sector also provides a useful indication of the possible knock-on effects for related industries and for local areas.

The survey measures confidence (overall sentiment) and uncertainty (predictability of the future). The companies in the sample completed questionnaires tailored to their sector: manufacturing (46.7 per cent), trade (18.2 per cent) and services (35.1 per cent). To construct the overall indices, the sectoral values were weighted according to the value added of large foreign-controlled firms (34.5 per cent for manufacturing, 32.8 per cent for trade and 32.7 per cent for services).

In the manufacturing sector, business sentiment is positively influenced by production levels and orders already secured from abroad, as well as by the overall volume of new orders. Excessive stocks of finished goods, on the other hand, are having a negative impact, whilst orders from the domestic market are having a neutral effect. Companies express very favourable assessments of their competitive position, particularly in foreign markets. Looking to the short term, there are positive signs regarding planned investment, whilst the employment outlook appears weaker: more companies are forecasting staff reductions than those expecting increases.

In the retail sector, the mood is generally positive, but expectations for the second half of the year are more cautious. Current confidence is underpinned by sales, particularly domestic sales, and held back by stock levels slightly higher than normal. Large foreign-controlled commercial enterprises report pressure on prices from suppliers, despite an improvement in competitiveness both on the domestic market and, to a greater extent, on the foreign market. The outlook is bolstered by orders placed with suppliers and, to a lesser extent, by planned investment, whilst employment prospects remain weak.