After the relatively high growth recorded in 2006 (1.6 per cent), Piedmont's GDP decelerated last year (1.4 per cent according to Prometeia estimates). Industrial production rose again, though its growth declined from 3.1 to 2.6 per cent. The expansion involved most of the region's sectors of specialization, notably the capital goods and automotive industries. Exports continued to impart a positive impulse, but their pace slackened, especially in the euro area and the United States. Investment appears to have continued to grow at a fair rate.
Despite the signs of a slowdown that emerged during the year, the climate of confidence among the region's industrial firms remained positive until the late autumn. Expectations began to deteriorate in December, signaling a significant deceleration in orders and production in the first part of 2008.
The situation in construction continued to worsen, mainly because of the weakness of public demand. Transactions in the real estate market declined after three years of expansion, in part reflecting the tightening of credit conditions; prices nevertheless continued to rise. The service sector, and distribution in particular, registered further, significant gains in employment. However, overall regional employment growth was half that of 2006, owing mainly to the sharp reduction in the second half of the year in industry excluding construction.
Between 2000 and 2006 Piedmont's economic growth was less than half the national average, primarily because of the recession that hit nearly all the main manufacturing sectors in the first five years. In each of these sectors the results were worse than those of the other leading industrial areas of Italy. In the transport equipment, textiles, mechanical machinery and paper industries, the negative cyclical developments were associated with structural changes produced by significant restructuring that led to a partial recovery in productivity at the end of the period. This was accompanied by a considerable selection of firms and, except in textiles, a reduction in firm size. By contrast, in the food products industry, the accumulation of productive factors continued notwithstanding a decline in value added, reflecting the cyclical nature of the crisis. In this difficult context, the Bank of Italy's surveys found that Piedmont's firms, which are notably exposed to international competition and whose competitiveness depends primarily on product quality and technological content, significantly altered their corporate strategies, mainly as regards their products. In some cases this involved a movement into a technologically close sector. According to the Bank of Italy's findings, the share of firms with better-than-average results in the period 2000-06 was greater among those that moved up to a higher-technology sector. Overall, about a quarter of all firms achieved relatively positive results in the period. Besides non-metallic mineral products, they were concentrated in some medium and high-tech sectors in which the region traditionally specializes.
Local competitiveness also depends on the intensity of innovation activity, the quality of local services, and the efficiency and degree of development of the financial system. This year the Report focuses in particular on business spending on research and development, the efficiency and quality of urban public transport, and the private equity and venture capital market.
According to Istat data, R&D spending by firms in Piedmont is the highest among the Italian regions. An analysis conducted by the Bank of Italy on a sample of manufacturing firms in the period 1999-2006 shows that the greater intensity of research was due mainly to the larger average size and higher propensity to spend of the firms that conduct research. On the other hand, innovation activity is generally less widespread in Piedmont than in the North-East; moreover, Piedmont continues to lag far behind the European regions with similar economic structures and levels of technology.
In urban public transport, the reform adopted at national level in 1997 has been implemented to a relatively low degree in Piedmont compared with the other Italian regions. In addition, controls on service efficiency and quality are relatively less intense. In the years since the entry into force of the new legislation, the number of regular passengers has remained unchanged and nearly all the qualitative indicators of customer satisfaction have declined. Between 1996 and 2005 the share of costs covered by fare revenues fell slightly, counter to the trend in Italy as a whole.
On the basis of data released by the Italian Private Equity and Venture Capital Association (AIFI), in 2003-07 the ratio of venture capital and private investment to GDP in Piedmont averaged 0.5 per cent, the highest among the Italian regions. The average deal in Piedmont was significantly larger than the national average for all types of transaction, especially buyouts (three times the national average).
In 2007 bank lending to manufacturing and construction firms accelerated, while lending to service firms slowed. The rate of growth in lending to households declined as regards both mortgages and consumer credit, influenced by the rise in interest rates. The share of new mortgage loans carrying a fixed rate jumped from 32.4 per cent in 2006 to 68.4 per cent. Loan quality remained about the same. It improved in industry and worsened in construction, reflecting the different cyclical performance of the two sectors. The flow of new bad debts increased slightly in relation to total outstanding loans to consumer households, signaling repayment difficulties due to the rise in interest rates. Piedmont's savers continued to prefer to invest generally in low-risk, low-yield instruments.
Local government primary expenditure in 2004-06 was higher in Piedmont than the average of the ordinary-statute regions; it also grew faster. The increase was sharper for current expenditure and for the regional government and local health units component, due to the role played by health care spending. Tax revenue rose during the three years at a slightly lower rate than the average for the ordinary-statute regions. Local government debt stood at 9.2 per cent of regional GDP at the end of 2006. The amount increased further in 2007, but less rapidly than in the previous year.
