The economy of Le Marche continued to stagnate in 2005. According to estimates by both Svimez, Association for Industrial Development in Southern Italy, and the Prometeia think tank, regional output declined slightly, respectively by 0.4 and 0.2 per cent. However, economic indicators pointed to a gradual recovery during the course of the year.
According to the Bank of Italy’s survey of over 370 local firms with 10 or more employees, turnover in manufacturing increased by 2.9 per cent at constant prices, compared with 1.3 per cent in 2004.
The corporate sector, and especially engineering firms, kept their prices down to counter competition. Production increased at a slower pace than sales. In the spring of 2005 a period of recovery began, apparently gaining strength in the early months of 2006. The firms in the Bank of Italy survey expect turnover in 2006 to rise by over 5 per cent in nominal terms.
The footwear industry, which had suffered three years of declining sales, began to pick up in 2005. In the engineering industry, however, the earlier expansion came to a halt; the decline in turnover and production was caused mainly by the downturn in demand for exports of household appliances.
The branches with the closest links to the construction industry, such as wood and furniture and non-metallic minerals, achieved growth on domestic markets. Results for the chemical and nautical industries were positive, particularly on export markets.
The recovery of footwear sales at home and abroad was not enough, however, to boost output back to the levels recorded prior to the start of the downturn as structural problems were aggravated by the pressure of competition from emerging countries with low labour costs. An analysis based on a survey of 140 footwear manufacturers identified two main corporate strategies: one based on strong quality differentiation, backed by investment in the trademark, in R&D, and in dedicated commercial networks, with high-price products; the other based on cutting production costs and even relocating abroad. Firms that adopted neither solution have experienced the greatest difficulties in recent years.
Exports from Le Marche accelerated slightly in 2005 to growth of 4.6 per cent. The modest recovery of the footwear industry and sharper upturn in the nautical and chemical industries contributed to this performance, while sales contracted in engineering and textiles and clothing. Among the various outlet markets, the largest growth occurred in the countries of the European Monetary Union, more than offsetting the losses in the United States and Central and Eastern Europe.
The uncertain economic situation was also partly responsible for the failure of capital formation to pick up in 2005 after declining for two years. According to the Bank of Italy’s survey, there was a further decrease in gross fixed investment of manufacturing firms at current prices. However, company plans indicate that capital formation should re-start in 2006, given expectations of a strengthening of the economic recovery and in view of the need to modernize plant.
In the construction industry output reached exceptionally high levels compared with the past thanks to the contribution of household demand for new dwellings and renovation work. There was only a small slowdown in the volume of property transactions and in the price of housing.
The service sector performed moderately well as a whole, despite differences between the main branches. Wholesale and retail trade stagnated, mainly because households curbed their expenditure on durable goods and non-food consumer products, but also as a result of the drop in overnight stays of tourists. The situation was more favourable for real-estate agencies and other marketable services.
According to the new labour force survey conducted by Istat, in 2005 the number of persons in employment residing in Le Marche rose by a small amount (0.2 per cent compared with 1.7 per cent in 2004). Increases in the service sector and particularly in the construction industry offset the drop of 3.6 per cent in industrial employment. The number of hours paid by the Wage Equalization Fund increased, as did the applications granted for ordinary unemployment benefits and mobility allowances. The employment rate was down slightly at 63.5 per cent and the unemployment rate fell from 5.3 to 4.7 per cent. Women encountered the greatest difficulties in the regional labour market, with a decline in the number of employed women and a sharp increase in those not in search of work or unavailable.
The growth in bank lending to customers in the region accelerated from 8.3 per cent in 2004 to 11.3 per cent in 2005. Long-term and indexed loans to households for property purchases or renovations remained the fastest rising component, albeit at a slightly slower pace than before. As regards credit to the corporate sector, the rate of increase of lending to energy and construction firms and to branches of the service sector other than wholesale and retail trade and transport accelerated, while that of lending to manufacturing diminished. Credit conditions remained broadly favourable, with a reduction in lending rates. The maturity of loans continued to lengthen.
Despite the unfavourable economic situation, the rate of downgrading of loans to bad debt status eased slightly, from 1.3 per cent in 2004 to 1.1 per cent in 2005, mainly in sectors of production other than industry.
Bank fund-raising in Le Marche grew by 2.4 per cent, compared with 4.9 per cent in 2004. The increase can be ascribed mainly to bank accounts, particularly current accounts and repos, while the contribution of bank bonds remained stationary. Direct fund-raising aside, asset management, shares, life insurance policies and net subscriptions of investment funds, balanced and flexible in particular, increased; government securities and non-bank bonds decreased.
The banks broadened their commercial network. The number of branches increased by 4.4 per cent, compared with 2.8 per cent in 2004, and internet banking services gained considerable ground.
