The latest national accounts revisions have revealed some encouraging economic indicators for Italy, particularly as the third quarter GDP remained static. Despite the overall stagnation, the latest figures show promise for future growth, reflected by slightly improved earnings forecasts. The adjustments indicate a half-point gain compared to previous projections, indicating optimism about the upcoming months.
One significant factor bolstering the economic outlook is the upward trend in salaries, helped by recent contract renewals within the service sectors. With pension increases and the thirteen-month bonuses amounting to approximately 400 million euros, combined with past decontribution policies and strong job growth (which rebounded in October after stagnation in September), there are solid expectations for favorable consumer spending during November and December.
According to the Confcommercio Consumption Indicator (ICC), household spending is projected to increase by 0.3% year-over-year for November. The seasonally adjusted GDP is also anticipated to rise by 0.1% month-over-month during December, leading to overall GDP growth of between 0.5% and 0.6% for the year, with real GDP growth estimated between 0.7% and 0.8%.
While these figures might seem positive, consumption patterns reveal mixed signals. Specifically, services are experiencing growth (+1.0% annual comparison) as goods remain stagnant, particularly food products, pointing to challenges with traditional consumption sectors. Retail sectors such as clothing and footwear continue facing difficulties, though recent months have shown modest demand recovery for furniture.
The automotive sector is particularly concerning, with both domestic and wider European trends indicating the need for substantial structural policies to aid recovery. A lot rests on December, as holiday consumer behavior can make or break annual economic outcomes. Surveys suggest households are approaching December purchases positively, with some spending anticipated to be front-loaded during the last week of November.
Inflation is experiencing some upward pressure, but remains within manageable levels, with estimates of 0.3% month-over-month and 1.6% year-over-year spikes expected for December. This inflation aligns with historical patterns, though recent increases primarily reflect the fading effect of last year’s energy price reductions.
For November 2024, the ICC displayed a 0.3% year-over-year increase, showcasing consumer demand stagnation for goods, but confirming continued growth for services. Positive dynamics included substantial gains for communication services (+6.1%) and personal care items (+2.1%). Although hotel and dining expenditures saw marginal improvements (0.3% year-over-year), they remain heavily influenced by weak internal demand.
The performance of individual consumption functions varies, with strong recovery signals found for air travel (+16.4%) and recreational services (+5.0%). While essentials such as groceries maintain consistent consumption rates, the automotive sector continues to struggle, with individual market demand decreasing by -6.5%. The recovery for clothing and footwear has also returned to negative (-1.0% year-over-year), indicating brief improvements were driven by varying weather conditions rather than increased consumer interest.
Regarding short-term price trends, overall consumer price growth is projected to be 0.3% month-over-month and 1.6% year-over-year for December 2024. Despite inflation encountering slight upward movements, the current data does not raise alarm. During the last quarter, consumer prices saw minimal month-to-month movements, with annual increases stemming mostly from the previous year's energy cost shifts. It is noteworthy, though, as price hikes primarily affect frequently purchased categories like food – potentially jeopardizing fragile recovery signals.
According to Marco Ballarè, President of Manageritalia, "Non vi sono dubbi – commenta Marco Ballarè, presidente Manageritalia – che l’economia sia in una fase debole. La tenuta e crescita del terziario, nella sua componente di mercato è confortante, ma questo non basta." This statement underlines the necessity for stronger support from the government, particularly for struggling sectors and the nurturing of those showing promise. He believes the economy needs the service and manufacturing sectors to function synergistically, enhancing overall national competitiveness.
Ballarè continued with the hope for increased governmental focus on crisis-stricken sectors and express strengthening of investments in thriving service segments: "Auspichiamo quindi – afferma – una maggiore attenzione del Governo con una politica economica di sostegno per i settori in crisi. At the same time, it is imperative to valorize segments of the service industry showing growth potential, enabling them to support the national economy effectively," illustrating the interconnectedness of Italy's economic fabric.
Overall, the outlook for Italy's economy remains mixed, with service sectors highlighting potential areas of growth against broader inflationary pressures and challenges across traditional spending categories. With December fast approaching, all eyes will be on consumer spending patterns over the holiday season, where favorable government policies may steer the economy toward recovery.
