Economic Bulletin No. 2 - 2018

Global growth is robust but risks relating to trade restrictions are emerging

Global economic activity and world trade continue to grow briskly. The risk of large-scale trade restrictions has risen following the US administration's decision to raise import tariffs on some products.

Accommodative monetary conditions are still necessary in the euro area

The euro area has also enjoyed strong growth, but inflation has yet to display a lasting return towards levels close to 2 per cent. The ECB Governing Council deems that an ample degree of monetary accommodation is still necessary and expects key interest rates to remain at present levels for an extended period of time.

Growth continues at a more moderate pace in Italy

Our estimates indicate that Italy's GDP grew by around 0.2 per cent in the first quarter, slowing down slightly compared with the previous quarter. Business and consumer confidence remain at cyclically high levels consistent with continued GDP growth, notwithstanding some less favourable signals recorded in recent months. The pace of exports was brisk in the last quarter of 2017 but became more moderate in early 2018. Firms plan to keep increasing their productive investment.

Labour market conditions start improving again, but inflation remains low

The latest data suggest that the labour market began to strengthen again in early 2018. However, wage growth is still modest. Inflation also remains moderate. Firms and households expect a slight acceleration in prices in the upcoming months.

The banking systems gains strength

Lending to firms showed signs of more vigorous growth, especially in the manufacturing and service sectors, also reflecting increased demand. Italian banks' conditions continue to improve: the share of non-performing loans is decreasing, profitability is rising, also looking ahead, and capital ratios are growing. Such positive developments are reflected in the performance of bank share prices, which have gone up by 18.7 per cent in the last twelve months.