The cyclical expansion continued in 2007 for industry in Friuli-Venezia Giulia, in contrast with stagnation at the national level, while activity weakened in the construction sector and commercial services.
Industrial firms' sales rose appreciably in real terms for the second successive year, thanks to the region's specialization in productive sectors, such as intermediate and capital goods, characterized by growing international demand. Exports at current prices increased by more than 10 per cent, with the region's trade balance improving further; the gain was stronger in the steel, machinery, and electrical and optical equipment sectors.
The high technological content of the region's industrial output is accompanied by the local economy's high propensity to innovate compared with the national average. According to a European Commission study, Friuli-Venezia Giulia ranks fifth among the Italian regions in terms of innovation and its patenting performance is appreciably better than the national average; by contrast, it occupies only an intermediate position among the 208 European regions.
The dynamics of industrial production corresponded to that of sales. The rise in activity levels was accompanied by a recovery of physical capital accumulation, with gross fixed investment up by about 20 per cent compared with 2006.
Both production and sales slowed gradually in the course of 2007, and production contracted slightly in the first quarter of 2008.
In the service sector, the favourable cyclical phase was reflected in an increase in rail and air traffic; container traffic through the port of Trieste showed strong growth. The region's tourist industry benefited from an increase both in the number of visitors and in that of overnight stays.
Employment continued to rise, thanks to the self-employed component; the unemployment rate, at historically low levels, edged down from 3.5 to 3.4 per cent. The number of hours covered by Wage Supplementation Fund ordinary benefits fell by one third.
In recent years the growing flexibility of the labour market has primarily regarded younger workers. Between 2000 and 2006 fixed-term employment contracts accounted for more than one third of new hiring in the private sector.
Bank lending stagnated in Friuli-Venezia Giulia in 2007, reflecting the decline in credit granted to financial and insurance companies. Net of such borrowers, lending grew at a comparable rate to the previous year (8.2 per cent, against 6 per cent in 2006).
Households' demand for credit remained robust, both for mortgages and for consumer credit. The quality of loans granted to households remained high: the ratio of new bad debts during the year to outstanding loans at the start of the year did not stray from the low levels of the last decade. Between the end of 1998 and the end of 2007 bank mortgage loans to households rose steadily and rapidly, from €2.1 billion to €6.3 billion. The share of new mortgage loans carrying a fixed rate began to increase in 2007 and shot up to nearly 60 per cent in the fourth quarter. In 2007 the average new mortgage loan had a loan-value ratio of 78 per cent and a maturity of 21 years.
Firms' bank debt continued to accelerate in 2007, led by the industrial and service sectors; lending to construction firms slowed sharply, though it still grew by more than 10 per cent. The demand for short-term credit, more closely tied to levels of activity, intensified particularly in manufacturing industry, in connection with the positive cyclical phase; the growth in medium and long-term credit remained moderate in spite of the upturn in investment. As with households, between 2006 and 2007 the flow of bad debts in relation to outstanding loans was basically unchanged for firms as a whole, but with differences by sector and size class; in 2007 the incidence of new bad debts was higher for sole proprietorships and construction firms.
Bank funding accelerated in all its main technical forms, with the sharpest growth in repos; funding from households grew by 6 per cent. The face value of households' financial instruments held with the banking system rose by about 8 per cent, led by Italian government securities, Italian bank bonds and foreign securities; the share of Italian investment fund units fell to just above 10 per cent at the end of 2007.
