Csc Flash Conjecture

Italy grows in the first quarter: record tourism but industry still lags behind

GDP rose in the first quarter by +0.3%. Problems in the global transport of goods, still expensive energy, high interest rates are weighing on it

by Nicoletta Picchio

18 May 2024

3' min read

Key points

Rates and inflation
Loan decline stopped
Rise in foreign tourism
Further industry downturn
Still growing employment
Germany's (partial) recovery
Bump for shipping costs between Asia and Europe

3' min read

The Italian economy is growing, the GDP rose in the first quarter by +0.3%, but at different speeds: positive is the tourism, on record levels, services, in moderate growth, and net exports. Industry, on the other hand, did badly, with production and consumption of goods contracting. Problems in global freight transport, still expensive energy and high interest rates are weighing heavily.

Rates and Inflation

This is what emerges from the Congiuntura flash analysis released by the Centro studi di Confindustria . One reflection concerns rates and inflation: Fed and ECB held rates steady in April-May (5.50% and 4.50%), the markets' expectation is for a first cut in Europe in June-July.

Inflation in Italy remained low in April (+0.8%) but in the Eurozone the descent stopped (+2.4%), with the core high (2.7%) compared to the 2 per cent threshold. So EU inflation is keeping rates high. As for oil, the price in May was 83 dollars per barrel, but on a high level, while gas is slowly rising, 30euro/mwh in May, up from 26 in February, more than double the value in 2019.

The drop in loans has stopped

As far as credit is concerned, the drop in business loans has stopped but is not helping consumption and investments. There was a slowdown in consumption in March, as indicated by retail sales (-0.1% in the month and -0.4% in the first quarter).

Foreign tourism on the rise

Services are growing less. Foreign tourism in January-February grew by 20% in terms of current expenditure over 2023. In March, the RTT index in services fell, -3.2%, but the first quarter closed with +2.3% in April.

Further industry downturn

Industry, on the other hand, is still going down: in March there was a further drop in the Rtt index, production was -0.5% in March, -1.3% in Q1. For April, all indicators are negative: confidence low, expectations slightly worse. On the other hand, net exports lift the GDP: in Q1 there was a sharp drop in imports, -2.8 per cent in volume, more than in exports, -08 per cent. This makes a positive contribution to GDP and increases the trade balance, + EUR 12.8 billion.

Still growing employment

As regards employment in the first quarter employment continued to grow, +0.2%, the result of 133,000 permanent employees, (+0.8%), -72,000 temporary employees, (-2.5%), and self-employed almost stable. But the rise in authorised CIG hours (+8.6% over Q1 2023) signals some slowdown. Contractual wages in private households accelerated, +4.7% in industry in Q1 2024, +2.3% in services, compared to +0.9% inflation.

Germany's (partial) recovery

Broadening the radius, the Eurozone GDP in Q1 2024 returned to growth, +0.3% after two quarters of slight decline. The news is the partial recovery of Germany. The US is slowing down, GDP in the first quarter slowed down, +0.4% from +0.8, growth in 2024 is already +1.8%. China did well with the first quarter above expectations, +5.3% trend GDP.

Rise in shipping costs between Asia and Europe

The Centro studi di Confindustria devoted an in-depth study to sea transport: from the beginning of December 2023 to the beginning of May 2024, the transports in the Red Sea fell by 61.5 per cent, while those around Africa rose by 91.5 per cent. Shipping costs between Asia and Europe jumped. Global shipping costs were 128.6 percent higher in May than five months earlier. Freight rates impacted the price of imported goods and the competitiveness of Italian products: in Q1 2024, about one-third of manufacturing companies experienced delays in sourcing inputs or higher costs on transportation.

The SCC estimated the effect of the increase in the cost of maritime transport on the producer prices of the various sectors. The increase has moderate effects, on average +0.9 per cent. But with significant sectoral differences: chemicals and metallurgy have +3.6 and +3.4, an effect offset by the deflationary push from China on some manufactured goods.