The interviews for the latest Banca d’Italia – Il Sole 24 Ore quarterly survey on inflation and growth expectations were carried out between 1 and 20 December 2011. A total of 698 companies with 50 or more employees took part, 366 of which operate in industry and 332 in services.
The main findings
Inflation expectations in Italy and change in companies’ selling prices
The expected rates of consumer price inflation show an increase of 0.8 percentage points compared with the September survey for all the time horizons considered, to 3.3 per cent for the 6-month horizon and to 3.4 per cent for the 1- and 2-year horizons. The projections are higher than the corresponding forecasts by professional analysts, especially for the longer time horizons. In December the twelve-month increase in consumer prices was 3.7 per cent,1.7 percentage points higher than expected in the December 2010 survey.
Businesses reported that they had raised their selling prices by 2.1 per cent from a year earlier, half a point more than reported in the September survey. The increase was larger than firms had expected for the following twelve months in December 2010 (1.4 per cent). The largest upward movements were among firms operating in services (2.2 per cent) and those located in the Centre (3.0 per cent).
For the next twelve months firms expect to raise their selling prices by 1.7 per cent, more or less in line with the September forecast of 1.6 per cent. Among the factors that will influence selling prices there is a slight reduction in the contribution of raw material prices and labour costs, while greater importance is attached to the shift in demand in curbing the upward pressure on prices.
Assessments of the general economic situation
About three quarters of the sample firms reported a worsening in the general economic situation towards the end of 2011, while once again fewer than 2 per cent reported an improvement. The negative balance between the two rose to 74 percentage points, following an already sharp increase to 62.2 points in the September survey, compared with 13.7 points in June. The proportion of firms reporting a worsening in the general economic situation was slightly smaller in the Centre and among large firms.
Again, more than half the firms surveyed saw zero probability of an improvement in the general economic situation in the next three months. Such pessimism was also found among exporting firms.
Demand
Firms’ assessments of the demand for their products in the last three months were less favourable for the third consecutive quarter: the balance between expectations of a decrease and an increase rose from 22.2 percentage points in the September survey to 34.3 points. The deterioration was less pronounced for firms who obtain at least a third of their turnover from exports.
By contrast, assessments of export demand improved: the balance between exporting firms reporting an increase in the demand for their products on foreign markets and those reporting a decrease turned positive, swinging from –4.1 percentage points in the September survey to +3.1 points. There was also an improvement in exporting firms’ expectations for the next three months: the proportion of those expecting an increase in foreign demand for their products rose from 21.6 to 28.2 per cent, while the proportion of those expecting a decrease fell from 18 to 15.1 per cent.
Assessments of firms' business conditions
About half of the firms expect a deterioration in business conditions in the next three months, compared with 38.1 per cent in the September survey, while the proportion of firms expecting an improvement rose from 3.8 to 5.2 per cent). Among the factors expected to influence business conditions in the next three months the contribution of the change in demand turned negative, while that, already negative, of credit conditions increased in absolute value.
Although the majority of firms continued to expect an improvement in business conditions over the next three years, the proportion fell from 49.8 in September to 48.4 per cent. By contrast, 29.6 per cent of the firms surveyed expected business conditions to worsen, against 25.6 per cent in September.
Conditions for investment
About two thirds of the sample firms reported a worsening in investment conditions, compared with 50 per cent in the September survey. The negative balance between firms expecting an improvement and those expecting a deterioration widened from –44.2 to –60.0 percentage points. The gap was particular large among firms in the North.
Conditions of liquidity and access to credit
In the December survey the sample firms were asked to predict what their liquidity situation would be in the next three months, given the expected change in their conditions of access to credit. About a third (31.1 per cent) considered that it would be inadequate, while 55.8 per cent expect it to be barely sufficient.
About half the sample firms (49.7 per cent) reported that their conditions of access to credit had deteriorated in the last three months, compared with 28.6 per cent in the September survey; only 2.0 per cent of firms reported that conditions had improved, against the previous figure of 3.4 per cent.
Employment
Around two thirds of firms again expected their employment to remain unchanged in the next three months, rising to 67.0 per cent from 64.5 per cent in the September survey. The negative balance between expectations of an increase and a decrease widened further from –9.9 to –16.9 points.
