Economic activity stagnated in Umbria in 2011 as a whole. After the faint signs of recovery that marked the first half of the year, the resurgence of tensions on the financial markets contributed to a pronounced slowdown in the final months of the year. The resulting increase in uncertainty was a factor leading to further cutbacks in firms' investment plans and the continuation of weakness in household consumption. Preliminary estimates by Prometeia put the growth in Umbria's GDP at 0.3 per cent, roughly in line with the national average.
Industrial firms' turnover at constant prices showed a modest rise with respect to 2010 but still fell short of the pre-crisis levels. Thanks to the recovery in foreign demand, export-oriented manufacturing firms reported relatively better results. The performance of turnover was more positive for engineering, textile and food product firms; for companies that process non-metallic minerals, sales remained at the low levels registered in 2010. Influenced by the deterioration in the cyclical situation in the final months of 2011, firms expect economic activity to contract in the current year.
In the service sector, activity stagnated. Affected by the weakness of disposable income and the high degree of uncertainty that characterized the general economic environment, two thirds of all merchants reported sales were down; the decline was sharper for smaller businesses. Firms in the tourism sector, especially higher-end ones able to offer a wider range of services, benefited from the upturn in arrivals and the increase in spending by visitors from abroad: the sector's total turnover rose, albeit modestly.
In the labour market, the disparities between age groups increased. While overall employment remained broadly stable, there was a further fall in employment among persons aged 15 to 34. The underutilization of more highly trained persons is considerably greater than the national average: nearly a third of university graduates are employed in low-skilled or unskilled jobs. The unemployment rate held stable at 6.6 per cent; recourse to wage supplementation remained limited and fell slightly in 2011 as a whole, but it turned upwards in the first four months of 2012.
After expanding more rapidly than the national average in the first two quarters, bank lending slowed abruptly in the second half of the year. The deteriorating economic outlook, together with the difficulty of raising funds because of the strains in the financial markets, caused banks, especially those belonging to the top five national banking groups, to become more selective in lending to both firms and households. The decline in credit demand, in response to low levels of production and the uncertain prospects for the economy, contributed to the slowdown in lending. It was accompanied by a significant increase in borrowing costs. The pace of lending slowed even further in the first three months of 2012, when, according to provisional data, the stock of loans to the productive sector contracted on an annual basis.
Loan quality continued to suffer from the weakness of economic activity. New bad debts rose in relation to outstanding loans to firms, especially in the case of loans to construction businesses. Leading indicators signal that the deterioration in credit is likely to continue.
