Economic activity lost speed in the second half of 2012 in Lombardy, as in the rest of Italy, with the resurgence of tensions in the international financial markets. According to Prometeia estimates, Lombardy's GDP grew by 0.5 per cent last year after a rebound of 2.4 per cent in 2010, still insufficient to regain the pre-recession level. The greatest stimulus to growth came from foreign markets. Exports, though slowing, returned to the peak values recorded in 2008; the geographical distribution of exports continued to shift to countries outside the European Union. On the basis of Prometeia estimates, the valued added of industry in the region increased slightly; cyclical indicators in the first quarter suggest that firms will cut back their production plans. Persistent margins of spare capacity are likely to continue to hold back investment during the current year. The construction sector shows no signs of overcoming its problems, which have become structural in nature. In services, value added increased modestly.
Compared with a group of European regions with similar productive structures and economic characteristics analyzed in the period 2007-2010, Lombardy suffered a sharper decline in GDP in the two years 2008-09; although the recovery in 2010 was in line with that of the peer group, it was insufficient to reach the pre-recession level. The recovery in manufacturing turnover in the years following the global recession was unevenly distributed among firms: it was more frequent for companies that had implemented strategies of internationalization between 2007 and 2009.
Employment stagnated in 2011 after two years in which the number of persons in work diminished by a total of 78,000. The unemployment rate reached 6.9 per cent in the last quarter of 2011, high by historical standards. The downtrend in recourse to wage supplementation came to a halt in the first quarter of 2012. The deterioration in employment was especially severe for young people, for whom employment declined even in a regional market more receptive than the national one. Between 2007 and 2010 households became more conservative in their spending, but consumption was nevertheless above the Italian average. In 2010, household wealth per capita (€161,000) exceeded the national average by 13 per cent.
The weakness of cyclical conditions was reflected in credit trends, with loans to firms stagnating and lending to households slowing. Recent data signal a worsening in the early months of this year, with lending to firms contracting and lending to households slowing further.
The sovereign debt crisis in the second half of 2011 and the cyclical deterioration led to a new tightening of credit conditions for both firms and households. Contributory factors were the difficulty banks had in raising funds on international markets and the concomitant stagnation in retail funding in the region.
The tightening of lending standards led first of all to an increase in the margins applied to loans; greater caution in lending policies was also reflected in the amounts disbursed to firms.
At the same time, there was a decline in demand for medium and long-term loans to finance firms' productive investments and households' property purchases, while there was an increase in businesses' demand for loans to cover working capital and the restructuring of debtor positions.
The sample surveys conducted during the spring with banks and firms in Lombardy signal expectations of an improvement in credit access conditions for both households and firms in the first half of this year.
Banks' policies of lending to businesses, especially in the construction sector, were also affected by developments in firms' creditworthiness and financial situation. New defaults, while slowing, remained high by historic standards, and leading indicators do not point to an improvement in the coming months: overdue loans and those with repayment difficulties increased during the year. After a modest recovery in 2010, firms' financial situation turned worse again in 2011. The difficulty of obtaining credit was greatest for companies with fragile balance sheets and medium/high risk profiles, as well as for those in the construction sector. By contrast, lending to sounder firms continued to grow.
For households, the modest growth in lending was accompanied by a debt level which, though rising in recent years, is still low by international standards. Both the share of indebted households and the average amount of their debt increased, more markedly for higher-income households. Thanks in part to the reduction in market rates, between 2007 and 2009 the percentage of financially vulnerable households diminished and that of those having difficulty repaying loans remained stable. In 2011 the indicators of deterioration in the quality of credit to these counterparties held at the previous year's levels. The value of Lombard households' financial assets continued to fall in 2011. Home banking, especially Internet banking, gained further ground with customers, and there was a significant increase in cashless and electronic payments.
