The world economy slowed in 2011, with the sovereign debt crisis in Europe acting as a hindering factor from the summer onwards. In Italy GDP grew less than global and euro area output. In Puglia, the worsening of macroeconomic conditions in the final part of the year interrupted the recovery of the economy that started in the second half of 2009: in 2011 as a whole, value added in Puglia expanded slightly, more than in the rest of the South.
According to the Bank of Italy's survey of a sample of industrial firms with 20 or more workers, turnover grew by 3 per cent in real terms. Sales growth was particularly strong for machinery firms, which benefited from vigorous foreign demand, and for food products firms, which were only slightly affected by the crisis. The rise in turnover did not turn into higher profits for industrial companies. Low capacity utilization, the uncertainty surrounding the state of the economy and the worsening of borrowing conditions weighed on investment, which diminished for the third consecutive year. Industrial firms' expectations remain cautious: in 2012 turnover is expected to edge up and investment to decline again.
Exports of manufactured goods grew by 18 per cent at current prices, more than both the national and the Southern regions' averages, but slackened very perceptibly in the last quarter. Since 2008, Puglia's exports have increased faster than those of the other underdeveloped regions of the European Union, including the other regions of Southern Italy, partly owing to the better positioning on international markets of some large industrial firms in the machinery and pharmaceuticals sectors. The gain in exports has not extended to traditional "made in Italy" sectors, which continue to suffer from an insufficient presence in higher-value-added products.
In the construction industry, the decline in activity under way since 2007 continued. Modest growth in activity was only recorded by larger companies, fostered by public works. In the housing sector, the number of house sales fell to lows for recent years.
Retail sales reflected the weakness of households' expenditure, particularly for durable goods. The contribution of foreign visitors extended the positive trend in tourism, while transports benefited from the growth in both goods and passenger traffic.
The moderate upswing of economic activity in 2010 and in the first half of 2011 fostered employment. This came to an abrupt end in the second half of the year, which also recorded a new increase in wage supplementation benefit hours. The number of employed workers grew by 12,000 in 2011, reducing the cumulative loss of jobs since the start of the crisis to 52,000, while the unemployment rate fell to 13.1 per cent. The recovery in employment was fuelled by elder workers; employment fell among the younger age groups, including the more highly-educated component. Students in Puglia outperform the average for the South of Italy on achievement tests but still fall short of the national average. However, the overall schooling rate is still low, even compared with the average of the South of Italy.
Household consumption has been dampened by the deterioration in the labour market since 2008; by the end of the last decade it had fallen back to its 2002 level. The decline in consumption during the crisis has been sharper in Puglia than in the rest of Italy but less severe than the average of the South of Italy. Households' wealth has been affected by the slowdown in house prices and the depreciation of financial assets.
Bank lending to borrowers resident in Puglia continued to expand in 2011, though much less rapidly in the closing months of the year. Weak loan demand was accompanied by a tightening of supply policies, as additional problems arose for banks on the funding front. The tightening of credit conditions, carried out by banks of every size, was reflected mainly in higher interest rates, but it also affected the amounts granted and the required collaterals.
Bank lending to firms grew primarily at medium and long-term maturities: given the persistent weakness of investment, the main contribution came from demand for debt restructuring operations. In the first half of the year the growth in lending favoured sounder companies, while in the last quarter the decline was more widespread. Towards the end of the year there was a contraction in loans to small enterprises, which had been increasing since 2010. The weak state of the economy was reflected in the deterioration in credit quality. The incidence of new bad debts on total firm loans rose, and the further growth in impaired positions relative to total loans could foresee a new increase in defaults in the coming months.
Bank lending to households expanded but it was affected by the weakness of the housing market and the worsening of banks' supply conditions. The characteristics of households' home mortgage loans have changed during the crisis: variable-rate loans have become preponderant again since 2010 and recourse to products with interest-rate caps has increased. The share of mortgages granted to young people has decreased.
In recent years, household debt and the cost of mortgage servicing have gone up in Puglia faster than disposable income. However, as in the rest of the country, the percentage of indebted households is higher in the higher income brackets, attenuating the financial vulnerability of households in the region. The financial accessibility of home ownership had benefited in 2009 and 2010 from the slowdown in house prices and from lower interest rates, but in 2011 it was reduced by the new rise in rates and by the greater difficulty of obtaining bank loans.
Local government expenditure in Puglia continued to grow in the three years 2008-2010, driven by current spending. In the same period, capital expenditure declined as municipalities cut back on investment. Last year a partial recovery in municipal investment spending took place: this development benefited from the speeding up of payments for investments financed by the European structural funds and the regional government's measure allowing higher local authorities' deficits with respect to those provided for by the Stability Pact.
In 2011 local government bodies in Puglia took extensive advantage of the autonomy permitted by national legislation to raise local tax rates in order to cope with the decline in transfers from the central government. The regional government's budget reflected the necessity of restoring financial balance in the healthcare sector, in accordance with agreements with the Ministry for Health.