Economic developments in LombardiaUpdate

Signs of a slowdown in industrial production emerged during the first half of 2007. Output continued to increase with respect to the first half of 2006, while falling progressively from the high levels recorded at the end of last year. According to the Bank of Italy’s survey, firms forecast an expansion towards the end of the year and the beginning of 2008. In the construction industry, there was a slight upturn in production in the public works sector, but the property market continued to slow. The region’s main branches of specialization reported an increase in exports in the first six months. Employment inched upwards owing to the rise in the number of payroll employees, contributing to a further reduction in the rate of unemployment. Demand and supply of female employment contracted, however. The deterioration in the economic situation in the first half of the year impacted on the credit market. Although bank lending slowed with respect to the end of 2006, the rate of increase remained high. There were clear signs of a slowdown in credit to households, partly due to securitizations. The ratio of bad debts to total loans improved. Bank funding from regional sources slackened with respect to December 2006, while securities of households on deposit with banks increased, particularly low-risk instruments. The outflow of savings from investment funds continued and net funds of regional clients in