The interviews for the quarterly Banca d'Italia – Il Sole 24 Ore survey on inflation and growth expectations were carried out between 4 and 19 December 2012. A total of 782 firms with 50 or more employees took part, of which 419 operate in industry and 363 in services.
Main findings
Inflation expectations in Italy and changes in selling prices
The expected rates of consumer price inflation for the six-month time horizon were revised sharply downwards, from 3.3 per cent in the September survey to 2.7 per cent, mirroring the slower rate of price growth in the final months of the year. The rates for the twelve-month and two-year time horizons, which had stood above 3.0 per cent in the previous four surveys, also decreased to 2.7 per cent, remaining higher than the corresponding forecasts by professional analysts, however. In December the harmonized twelve-month increase in consumer prices was 2.6 per cent, 20.8 percentage points lower than expected in the year-earlier survey.
Firms estimated that their selling prices had risen by 0.9 per cent from a year earlier, about half the increase expected in the year-earlier survey. Slightly higher increases (1.2 per cent) were recorded among larger firms. For the next twelve months, firms expected to raise their selling prices by 0.8 per cent, having revised their estimates downwards from 1.3 per cent in the September survey. Raw material prices and labour costs decreased in importance among the factors influencing prices; changes in demand had a stronger moderating effect than in the previous surveys.
Assessment of the general economic situation
Pessimism regarding the general economic situation, which had lifted in September, deepened towards the end of 2012. The percentage of firms indicating that conditions had improved fell by almost half, to 3.8 per cent, while those reporting a deterioration rose from 50.6 to 57.5 per cent, compared with 70 per cent in June. The balance between positive and negative judgments was less unfavourable in the South and especially among larger firms. Looking ahead, the proportion of firms that saw zero probability of an improvement in the general economic situation in the next three months rose from 52.3 to 59.8 per cent; the increase was less marked among exporting firms.
Demand
Firms’ assessments of overall demand for their products worsened slightly: the negative balance between expectations of an increase and a decrease in demand widened from 27.6 percentage points in the September survey to 30.2 percentage points. Less pessimistic opinions (-17.2 percentage points) were recorded for the present quarter.
Assessments regarding foreign demand remained generally favourable, albeit less so than in September: about 25 per cent of exporting firms reported an increase in the last quarter (32.1 per cent in the previous survey), almost 5 percentage points more than the share of firms that indicated a decrease; in September the balance was about 10 percentage points. Looking ahead over the next three months, exporting firms continued to expect a positive contribution from foreign sales, with 27 per cent predicting an increase and 14.7 per cent a decline.
Assessment of firms' business conditions
The proportion of firms expecting their business conditions to deteriorate in the next three months rose slightly with respect to the September survey. The negative balance between those reporting an improvement and a deterioration was close to the level of last June (-38.0 percentage points). Among the factors cited by firms as having a negative influence, changes in demand and in credit conditions gained importance with respect to the previous survey.
For the longer term, the percentage of firms expecting conditions to improve over the next three years fell from 61.0 per cent in September to 53.8 per cent. More favourable assessments were expressed by industrial firms and by firms with at least 200 employees.
Conditions for investment
The percentage of firms that believed conditions for investment worsened in the last quarter of 2012 rose to 43.9 per cent, from 37.5 in September; as a result the balance between positive and negative judgments widened from -31.6 percentage points in September to -37.0 points).
Almost 40 per cent of companies reported a reduction in nominal spending on investment in 2012 compared with the previous year, while 23.1 per cent reported an increase. Expectations for 2013 as a whole were slightly less negative: the share of firms planning a reduction in investment was 14 percentage points higher than that of companies planning an increase. The balance of forecasts for the first half of 2013 was slightly worse (-16 percentage points).
Liquidity conditions and access to credit
Firms’ expectations regarding their liquidity position over the next three months were slightly less favourable than in the September survey: the share of those that believed liquidity would be insufficient rose from 24.8 to 28.6 per cent, while the percentage of those who viewed it as sufficient remained around 12 per cent. The picture was again slightly better for larger firms.
There was an increase in the share of companies reporting a deterioration in conditions of access to credit in the fourth quarter of 2012 (30.5 per cent, compared with 26.1 in the September survey). The percentage of those indicating an improvement remained negligible.
Workforce
Some 61.9 per cent of companies believed that the number of employees would remain unchanged over the next three months. The negative balance between expectations of an increase and a decrease in the workforce widened to -23.3 percentage points, from -18.2 points in September; the gap was particularly pronounced in the case of large firms (-35.5 percentage points).
Construction companies
The opinions regarding the general economic situation appeared less favourable than those formulated by industrial and service firms. About half the construction firms reported a decline in demand in the last three months. For the first quarter of 2013, more than 50 per cent expected a worsening of business conditions, although the picture was forecast to improve over the next three years.
Nearly half of all construction companies reported a worsening of conditions for investment in the last quarter. A similar percentage indicated that the number of employees would remain unchanged in the next three months, while more than a third anticipate a reduction.
