Short-term economic overview (20 May 2013)

Monetary policies are at a turning point. The European Central Bank decreased the interest rate on the main refinancing operations to 0.50% and it’s ready for new cuts. New measures also for the Bank of Japan.

Growth trends were unvaried in the first three months of 2013: developing GDP in China, the USA and Japan while contracting in the Euro Area (Italy has decreased for the seventh consecutive quarter, France entered in recession and Germany in stagnation).

The main economic leading indicators (in other words the indexes which anticipate turning points in economic activity) don’t show a turnaround for Europe in the short term: the confidence index continued to decrease and the Purchasing Manufacturing Index (PMI) showed a contraction in the activity; on the other hand the Composite Leading Indicators (CLIs) of the OCSE rose in comparison to the end of 2012.

Financial markets have been recovering thanks to the strong expansionary monetary policies: their historical maximum for New York and Frankfurt, its maximum since 2008 for Tokyo, Milan recovering but still under its maximum levels of 2013 (reached in January).

Euro weakened slightly relative to dollar (the exchange rate is around 1.29, its minimum of the last month and a half), while it appreciated strongly relative to yen (around 132, its highest level since more than three years).

Industrial raw material prices in euro went down by 1% in April, mainly due to the decreasing price of Brent Oil (an average of 103$ barrel in April from 106$ in March).

European inflation descended also in April to 1.2%, its minimum for the last three years. The decreasing trend was strong in Italy (to 1.1%) and in Milan (to 1.2%), too.

In March the unemployment rate reached 12.1% in the Euro Area, while it went down to 7.6% in the USA. The unemployment rate was stable at 11.5% in Italy and at 5.4% in Germany, while it grew in France (to 11.0%) and in Spain (to 26.7%).

In April the manufacturing confidence index¹ kept decreasing in the Euro Area because of contracting orders and production expectation, while inventories increased over normal levels. The index slowed down in Germany, France, Spain and also Italy. On the contrary, in the area of Milan the manufacturing confidence index rose in March on its maximum level since Autumn-2011. The rise was mainly due to increasing foreign demand, whose recovery was widely forecasted (expectations on foreign orders were strongly positive and increasing during the three previous months). Also the domestic demand augmented, but slightly and the balance remained negative. In general, firms seemed to be careful: despite the recovery of the demand, inventories kept going down and production expectations descended. According to some preliminary (and partial) data of April, the manufacturing confidence index has been increasing again, with the demand still growing.

In the first quarter of 2013 the Italian manufacturing export decreased by 0.8% compared to the same period in 2012. Between sectors, metal products (-8.4%), automotive (-2.7%), electronics (-2.5%) and rubber-plastic (-1.2%) went down, whilst pharmaceutical (+16.6%) and food (+8.4%) continued to expand sharply. Between countries, the contraction is particularly strong for the export to the Euro Area (-5.7%) and especially to Spain (-12.5%), to Germany (-6.7%), to Netherlands (-4.8%) and to France (-3.3%).

The total amount of authorized hours of CIG² grew by 13% in Italy and by 5% in the area of Milan (provinces of Milan, Lodi and Monza Brianza) between January and April 2013 compared to the same period in 2012. In April 2013 the hours of CIG were stable compared to the previous month in the area of Milan, while they increased compared to April 2012 (+44%) mainly because of the rise of CIG Straordinaria, only partially compensated by the reduction of CIG in Deroga. Relative to the Assolombarda companies, CIG Ordinaria was unvaried in April 2013 over March 2013, while growing in the total area of Milan.

Footnotes

1 Data referred to European countries are extracted from the monthly survey on manufacturing sector harmonized by the European Commission. Assolombarda carries out an analogous survey interviewing 350 associated companies every month. The manufacturing confidence index is the main indicator of these surveys and is calculated as the mathematical average of the seasonally adjusted data on production expectations, orders and stock of finished products (with inverted sign).

2 Cassa Integrazione Guadagni (CIG) is a particular Italian shock absorber. It is a redundancy fund which helps companies to keep labour force in times of economic difficulties. It allows workers to receive a part of their wages. There are three kinds of CIG: Ordinary (Cassa Integrazione Ordinaria - CIGO), Extraordinary (Cassa Integrazione Straordinaria - CIGS) and Special (Cassa Integrazione in Deroga - CIG in Deroga).

Contact us

For further information please contact the Research Department tel. +390258370.409, e-mail stud@assolombarda.it.