The expansionary phase that began in Tuscany in 2006 continued in 2007, although with lower annual GDP growth. A deterioration in the cyclical picture was reflected in an appreciable slowdown that appears to be continuing this year.
Industrial production decelerated sharply from the summer onwards, after growing strongly in the first half of the year. As in the preceding years, large companies and those in the mechanical machinery sector outperformed the average. The brisk pace of activity in the fashion industry in 2006 was not confirmed. The Bank of Italy's survey found stagnation in investment, after the recovery recorded the previous year.
Developments in construction were moderately positive, although the demand for houses began to feel the bite of the rise in interest rates. The volume of public works activity, which was still supported by the projects begun in earlier years, could fall in the future as a result of the significant decline in new contracts put out to tender.
The situation in services remained favourable as a whole, but there was a slowdown in tourism and further stagnation in distribution.
Exports of Tuscany's main products lost steam in the final part of the year. Overall, the region's exports grew by 6.9 per cent in nominal terms, less than the national average. The characteristics of firms that derive a substantial share of their turnover from exports have changed since the 1990s, partly owing to the adoption of the euro and to heightened international competition. Being present in foreign markets requires a stable organizational structure and is associated with greater size and profitability. The variability of export performance across firms has increased, indicating that factors of individual competitiveness play a more important role.
Employment edged upwards on an annual basis, underperforming the national average. Women and self-employed workers accounted for most of the growth. The participation rate of young people continued to fall, indicating postponement of entry into the labour market.
Bank lending in the region showed robust growth of about 10 per cent, outpacing GDP. Lending to firms was affected by the low propensity to invest in assets other than real estate; the slowdown in lending to manufacturing and construction firms contrasted with an acceleration in loans to service companies. Lending to households reflected weaker mortgage demand; there was a decline in the volume of new mortgage loans, the bulk of which were made at fixed rates. The growth in lending to households fell sharply in the first quarter of 2008.
A medium-term analysis sheds light on specific features of the business loan market in Tuscany in terms of costs and customer relations. Historically, short-term lending rates have been higher in Tuscany than in Italy as a whole. The differential, which has narrowed in recent years, is due mainly to the sectoral and size structure of the region's economy. By national standards, minor banks play a relatively large role in lending to small enterprises. Compared with larger companies, small firms deal more often with a single bank and their debt is based to a greater extent on technical forms where face-to-face relationships are an important factor.
Loan quality did not change substantially in 2007: the growth in new bad loans was smaller again than that in lending and the ratio of new bad debts to the stock of loans at the beginning of the year did not exceed 1 per cent. Up to now, the difficulties encountered by households have not led to a significant rise in loan delinquency. One reason for this is that banks have been willing to revise the terms and conditions of loans, primarily by lengthening the maturity.
Low-risk instruments continued to be preferred for the investment of savings. The rise in the opportunity cost of holding money produced a marked slowdown in deposits and a sharp increase in bank bonds with respect to 2006. There was again a net outflow from banks' individually managed portfolios and from securities investment funds.
Between 1998 and 2006 the per capita financial wealth of the population of Tuscany grew at an average annual rate of about 4 per cent in nominal terms. Its composition changed significantly: among assets, the share of equities, bonds and investment fund units rose to the detriment of government securities and liquidity; on the liabilities side, there was growth in consumer credit and, above all, loans for house purchases.
