Economic activity in Umbria slowed progressively in 2007, owing above all to stagnant domestic demand. The first quarter of 2008 brought signs of a further deceleration.
In manufacturing industry the gap widened between the more innovative firms, which continued to gain market share at home and especially abroad, and makers of traditional products. For the second successive year small firms registered an increase in sales, which nonetheless remained below their level at the start of the decade. Profit margins were squeezed by the appreciable rise in production costs. Firms' uncertainty about the future evolution of orders was reflected in weak investment. The construction industry appears to have exhausted the phase of expansion that had lasted about eight years; housing demand faltered and the amount of public works under construction contracted for the third year in a row.
Distribution, whose contribution to value added and employment in Umbria is one of highest among the Italian regions, achieved inferior results to those of the previous year, notably in the food sector; the greatest difficulties concerned small-scale retailing. The number of overnight stays by visitors to the region also grew less rapidly than in 2006, especially as regards Italian tourists.
Employment expanded faster again in Umbria than in Italy as a whole, led by payroll and female employment. A contribution came from the further increase in the number of foreign workers. The unemployment rate fell to the all-time low for the region.
Lending to residents grew at a high overall rate, though lower than in 2006. The rate of increase fell for consumer households, which had sustained the expansion in the preceding years, and for small firms, while it rose for medium-sized and large non-financial companies, especially those in manufacturing. The flow of bad debts diminished in relation to the stock of outstanding loans. The payment of mortgage loan instalments, made more burdensome for households by the rise in market rates, was facilitated by the renegotiation of amortization schedules.
The intensified strains in the equity market and the increase in the opportunity cost of holding deposits reinforced the propensity to invest in less liquid but relatively low-risk assets such as repos and bonds.
