The growth outlook for the global economy remains modest
Following an improvement in the spring, signs of a slowdown in the world economy are emerging, mainly owing to weak manufacturing. In the United States, economic activity remains robust; the labour market is cooling slightly. In China, the sluggish domestic demand, which continues to be affected by the real estate crisis, is curbing GDP growth. According to the OECD's September estimates, global GDP growth will stand at just above 3 per cent in 2024 and 2025, in line with last year's figure, but below the average recorded in the decade before the pandemic. According to our assessments, international trade will grow more slowly than GDP on average in 2024.
The Federal Reserve lowers its official rates and the People's Bank of China adopts new expansionary measures
Inflation continues to decrease in the United States. In September, the Federal Reserve lowered the benchmark rate by 50 basis points for the first time since March 2020, to 4.75-5.00 per cent, given the reduction in inflation and the slowdown in the labour market. The Bank of England, which had cut its rates in August, left them unchanged in September. In Japan, the central bank raised its reference rates at the end of July; the expectation of further increases, in conjunction with disappointing data releases on the US economy, triggered strong financial market tensions in early August, which then broadly subsided. In order to support economic growth, the People's Bank of China launched a package of extraordinary expan-sionary measures in September, in addition to last July's cut in reference rates.
Euro-area economic activity remains disappointing and disinflation continues
According to our assessments, the stagnation in euro-area GDP continued in the summer months: the manufacturing cycle remained weak, while the expansion in services persisted, reflecting the good performance of the tourist season in particular. In September, inflation continued to decrease, as did its core component. Service price inflation remains high, especially for prices that adjust with a lag to past inflation. The Eurosystem staff projections published in September indicate that euro-area consumer price inflation is expected to decrease gradually, from 2.5 per cent in 2024 on average, to 2.2 per cent in 2025 and to 1.9 per cent in 2026.
The ECB lowers its key interest rates again
After a first cut in June, in its September meeting, the Governing Council of the European Central Bank further lowered its deposit facility rate by 25 basis points. In September, the reduction to 15 basis points of the spread between the rate on the main refinancing operations and the deposit facility rate came into force, as decided by the Council last March.
Growth continues at a moderate pace in Italy
Based on our assessments, growth in Italy was moderate over the summer; a new expansion in services was accompanied by the persistent weakness in manufacturing. Aggregate demand benefited above all from the performance of consumption, supported by the recovery in disposable income, against a negative contribution from net exports, at a time when the main euro-area economies are sluggish.
The current account surplus increases
In the second quarter of 2024, the current account surplus increased, mainly owing to the reduction in the primary income deficit and to the services balance, which turned positive. The financial accounts remained essentially balanced; net purchases of Italian securities by non-residents, mainly government bonds, remained high. The negative TARGET balance continued to edge down in the summer months as well. Italy's positive net international investment position rose to about €225 billion.
Labour demand weakens and real wages strengthen gradually
Although the growth in headcount employment continued in the summer months, some signs of weakness in labour demand emerged: fewer job vacancies and the number of hours worked decreased in the second quarter. Labour participation fell slightly in the summer, contributing to the decline in the unemployment rate. The recent collective bargaining agreement renewals are spurring a gradual recovery in real wages.
Inflation decreases
After increasing in July, inflation fell again, reflecting the further decline in energy prices. The core component also decreased, although price growth remains relatively high in services, mainly owing to tourism-related items. Households and firms continue to expect moderate price growth in the short and medium term.
The cost of lending falls slightly, but demand for loans remains low
Financing conditions for households and firms benefited from the reduction in the cost of bank funding. Despite credit standards easing slightly in the spring, bank lending to non-financial corporations continued to contract, mainly owing to lower demand for investment loans. In contrast, the decline in lending to households came to a halt, and loans began to increase again for the first time since the beginning of 2023, albeit marginally.
The Government presents Italy's medium-term fiscal-structural plan
On 27 September, the Italian Government approved its medium-term fiscal-structural plan, which is the main budget document under the new EU economic go-vernance framework. The Government expects net expenditure to grow by an average of 1.6 per cent per year in the period 2025-29. In the same period, under the policy scenario, the deficit will likely be higher than that in the current legislation scenario, but is expected to drop below 3 per cent of GDP in 2026. The debt-to-GDP ratio is set to continue to increase, reaching 137.8 per cent of GDP in 2026, and to then decrease by an average of 1 percentage point per year until the end of the fiscal consolidation process.
Istat revises the national accounts data
On 23 September, Istat published the general revision of its national accounts for the years 1995-2023, as agreed at European level. GDP growth was revised upwards in 2021 and 2022 and slightly downwards in 2023. The revisions were due to higher growth in domestic demand than was previously estimated, while the contribution of foreign demand remained broadly unchanged.
GDP is expected to strengthen gradually and inflation to remain moderate in the next two years
Our projections confirm for 2024 the previous assessments of GDP increasing to 0.6 per cent (0.8 per cent without calendar adjustments) and point to an acceleration in the following two years, when GDP is expected to grow cumulatively by over 2 per cent. Consumption and export performance will gain greater momentum starting from next year, benefiting from the recovery in household purchasing power and from international trade. Investment will continue to be affected by the still high cost of financing and by the downsizing of incentives in the construction sector, the effects of which will, however, be mitigated by the NRRP stimulus measures. Consumer price inflation will remain low, at 1.1 per cent in 2024 and at 1.6 per cent in both 2025 and 2026. This year in particular, the pressures stemming from the acceleration in wages will be offset by the low growth in the prices of imported goods and by the fall in profit margins.
