Research Dept. News
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Monthly Report, num 346 - May 2011
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European union - Italy
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Italian consumers show caution
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The official forecasts for Italian GDP growth in 2011 and 2012 are lowered.
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Relatively unclear prospects for the labour market and an upswing in inflation have influenced Italian consumers, who were very prudent in their spending at the start of the year. Retail sales recorded a slight drop in January compared with the previous month and vehicle registrations posted sharp year-on-year falls in the first quarter. In March, consumer confidence deteriorated slightly, so that consumption will probably continue to be weak over the coming months. In fact, a slight fall is predicted in domestic tourism spending for the Easter holidays compared with the same period a year ago.
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There are highs and lows regarding supply. Industrial production picked up in February, with a seasonally adjusted monthly increase of 1.4%. Moreover, the new orders in portfolio showed a year-on-year rise of 16.2% at current prices. This increase occurred both for domestic orders, 17.4%, and foreign orders, 14.3%. Industrial confidence also improved in March, so that the outlook was favourable for the secondary sector in the short term. However, construction didn't start the year well, posting a 1.0% monthly drop in production in January, and confidence in the sector fell slightly in February.
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Regarding the foreign sector, exports rose strongly in the first two months compared with the same period in 2010. However, imports rose more, considerably widening the trade deficit, although the non-energy balance posted a surplus. On the whole, the rate of progress of the Italian economy probably speeded up slightly in the first quarter.
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Disappointing figures for retail sales and industrial production.
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On the other hand, the public deficit stood at 4.6% of GDP in 2010, 0.4 points less than in the official forecasts of September, although the primary imbalance, i.e. without taking interest payments into account, was practically zero. Public debt continued to increase, up to 119% of GDP. To reduce these imbalances, the Italian executive confirmed its commitment to reduce its public deficit to 3.9% of GDP in 2011 and to 0.2% in 2014 in its 2011 Document of Economy and Finances. From then on, the surpluses should help to reduce the level of public debt. Moreover, there is a plan to introduce a mandate into the Constitution for more precise and direct budgetary balance. The government also presented its National Reform Programme, in line with the Euro Plus Pact.
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At the same time, official forecasts for GDP growth in 2011 were reduced by 2 tenths of a percentage point to 1.1% and for 2012 by 7 tenths of a percentage point to 1.3%. This low growth seems logical if we take into account the planned budgetary consolidation policy and the problems of competitiveness suffered by the Italian economy.
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