During the summer the economic conditions of Piedmont started to worsen again, ending the recovery that had begun in the second half of 2009. The slowing down of the world economy and the financial turbulences connected with the sovereign debt strains in the euro area played a part. According to Prometeia estimates, Piedmont's GDP grew by 0.7 per cent in 2011, from 2.0 per cent in 2010.
In the manufacturing sector, demand progressively weakened during the year. This was reflected in a contraction of production in the third quarter. Despite their slowing down, exports remained the main contribution to growth. At the end of 2011 their nominal value exceeded the levels recorded before the international crisis of 2008-09, thanks above all to the expansion in non-EU markets. According to the Bank of Italy's surveys, in 2011 firms' turnover grew in real terms by about 3 per cent, half as much as in the previous year. With domestic demand sluggish, firms also reported a shift in the composition of their sales from the domestic market to the international one.
Investment by firms remained weak last year due to the existence of large spare capacity, to the high uncertainty of the economic outlook and, in the second half of the year, to the deteriorating conditions of accessing to credit.
In the construction industry, the negative phase that began in 2007 continued, due to the persistent weakness of public and private demand. The number of transactions in the real estate market remained far below the last cyclical peak and prices began to drop again in the second half of the year. In the tertiary sector, the growth rate of the value added declined. Goods transport followed the cyclical curve of production, losing pace over the year as a whole. Tourist flows also slowed. Wholesale and retail trade was adversely affected by the stagnation of consumption, which in turn reflected the weakness of disposable income and the uncertain outlook for the labour market. Between 2007 and 2010 household spending at constant prices fell in Piedmont by more than 4 per cent, more than the average of the regions of the North-West.
Firms' profitability, which had improved in 2010 though remaining slightly below the pre-crisis levels, is estimated to have worsened last year.
Compared with a group of European regions which in 2007 had similar structural characteristics, Piedmont has recorded a slower recovery in both total and per capita value added. Exports, which have provided the main impulse to expansion in the last two years, have recovered more slowly than the peer-group average and also the world trade. The growth in export did not keep the pace with the foreign demand in the main final markets and in the most dynamic product sectors. The share of exports going to emerging markets is still limited.
In a context of exceptional economic uncertainty, our survey found that firms' expectations about the next six months are pessimistic with regard to domestic demand, while forecasting a slight improvement in orders from abroad. For 2012, firms expect similar levels of turnover to those of the previous year and a modest decline in investment.
In the labour market, after two years of decline, employment increased again in 2011, though it still remains below its 2008 level. The progressive raising of retirement age may have played a part in this increase, which mainly regarded women. Recourse to wage supplementation diminished after rising for three consecutive years, but the number of hours authorized remains at historically high levels. The average unemployment rate remained at the previous year's level, at 7.6 per cent, the highest figure among the regions of the North.
The recession has had a strong impact on young people: their employment rate has fallen and the percentage of those not in employment, education or training (Neet) has increased among both high-school and university graduates. In addition, the proportion of young people working in jobs for which they are overqualified has grown significantly in the last three years.
The general level of education of the population in Piedmont has risen over time, although it is still below the average in the North-West and, for university graduates, also below the national average. According to the Invalsi and OECD-PISA test results, Piedmontese students outperformed the national average in both primary and secondary school, but fell short of the average for the regions of the North West, the gap increasing with the level of schooling.
In the credit market, lending to firms began to grow again in the first nine months of the year, but then declined from the autumn onwards; the contraction, which affected firms of every size, reflected the weakness of demand, due to the negative trend of the economic conditions, and the tightening of the requirements for access to credit linked to the rising pressure on Italy's sovereign debt and the banks' difficulty in raising funds on international markets. Our analyses of a sample of almost 15,000 Piedmontese firms found that the decline in credit and the increase in interest rate spreads were quite common across the various classes of credit rating for firms and the different types of banks.
Lending to households continued to expand at the moderate pace of the previous two years. Although the level of debt of Piedmontese households has risen in recent years, it is lower than the national average, which in turn is low by international standards. The burden of debt service has also remained low, below the national average, thanks to the reduction in interest rates that began in 2008. Just over 10 per cent of households in the region have home mortgages, which account for the bulk of household debt; the proportion rises with household income. Households' participation to the mortgage market has been adversely affected by the recession, which has caused a decline in new mortgages with respect to the 2006-07 peak and a growth in the proportion of variable-rate mortgages.
The deterioration in the economic conditions in the second half of 2011 was reflected in the quality of credit, which turned worse again in the fourth quarter owing to the increase in new bad debts on loans to firms, particularly construction companies. The quality of loans to consumer households improved in 2011.
Bank deposits from households and firms stagnated in 2011, as in the previous year, for both accounts and bank bonds. According to our preliminary estimates, Piedmontese households had an 8.3 per cent share of Italian households' net wealth, corresponding to almost €161,000 per capita; in relation to households' disposable income, this value was lower than the average value for the North-West and in line with the national average. Between 2002 and 2007 the net per capita wealth of Piedmontese households had grown by a little less than 4 per cent a year, lagging the national average; its rate of growth declined following the 2008-09 financial crisis, which had an especially strong impact on the value of financial assets.
