The Italian economy is experiencing growth, but at different speeds across sectors according to a report by the Confindustria Research Center. In the first quarter of 2024, the Italian GDP increased by 0.3%, with positive performances in tourism (at record levels), services (moderate growth), and net exports. However, the industrial production and consumer goods consumption contracted. Challenges such as global freight transport issues, high energy costs, and high interest rates are affecting the economy, leading to a decline in confidence among families and businesses.
One area of concern is interest rates and inflation. The Federal Reserve and the European Central Bank kept rates steady in April-May (5.50% and 4.50% respectively), with expectations of a possible rate cut in Europe in June-July. In April, inflation in Italy remained low at 0.8%, but in the Eurozone, the decrease stopped at 2.4%, keeping EU inflation rates high. The price of oil was $83 per barrel in May, while gas prices slowly increased to 30 euros/mwh, compared to 26 euros in February, more than double the values from 2019.
The decrease in loans for businesses has stabilized, but it has not boosted consumption and investments. Retail sales dipped by 0.1% in March and 0.4% in the first quarter, indicating a slowdown in consumer spending. Foreign tourism spending showed a 20% increase in January-February compared to 2023. Although the services RTT index dropped by 3.2% in March, the overall first quarter growth was 2.3% in April.
The industrial sector, however, continued to decline with a further drop in the RTT index in March and a production decrease of 0.5% in March and 1.3% in the first quarter. April indicators were negative with low confidence and slight worsening of expectations. On the positive side, the net export contributed to the GDP growth as import volumes dropped by 2.8% and exports by 0.8%, resulting in a positive contribution to the GDP and an increase in the trade balance by 12.8 billion euros.
In terms of employment, the first quarter saw an increase in employed individuals by 0.2%, with 133 thousand permanent employees (0.8% increase) and a decrease of 72 thousand temporary employees (2.5% decrease) while self-employed individuals remained stable. Contractual wages in the private sector accelerated with a 4.7% increase in the industry and a 2.3% increase in services during the first quarter of 2024, compared to the 0.9% inflation rate. Despite overall growth, challenges in the industry and consumer spending remain, with inflation rates and interest rates playing major roles in shaping the economic landscape in Italy.
