The global slowdown continues
International trade has continued to contract and global economic growth has slowed. There are still significant risks associated with trade tensions, the economic slowdown in China and the uncertainty surrounding the timeframe and the arrangements for the United Kingdom's withdrawal from the European Union (Brexit). Global financial conditions are now highly expansionary; greater uncertainty about the outlook for growth and the very accommodative stance adopted by the central banks have led to a sharp fall in long-term yields.
The ECB Governing Council introduces new expansionary measures
In the euro area, there has been a marked contraction in German industrial production, which is particularly vulnerable to world trade conditions, but the slowdown has spread to other sectors and countries as well. There is a growing risk that the unfavourable cyclical situation will determine a prolonged decline in the inflation expectations of the financial markets, firms and households. The ECB Governing Council, confirming the assessments made in previous months, adopted an ample package of expansionary measures with broad consensus, although with differing views on the individual instruments.
Economic activity in Italy appears to remain stationary
Economic activity in Italy appears to have remained almost stationary in the third quarter, mainly owing to the slowdown in manufacturing. In the Bank of Italy surveys carried out in September, firms reported slightly more expansionary investment plans, with more positive assessments of investment conditions, the economic situation and the trend in demand.
The fall in government bond yields is significant ...
On the Italian securities markets, conditions have become significantly more expansionary: in the third quarter, the yields on ten-year government securities reached their lowest level since the introduction of the euro and they have remained very low by historical standards. This is in part attributable to the reduction in the uncertainty perceived by market participants as regards the economic policy stance and the stance vis-à-vis the European institutions.
... and has spread to the cost of funding the economy
The fall in the yields on government securities has significantly lowered the cost of bank wholesale funding and of corporate bond yields. The cost of loans to firms and households has gone down slightly.
