In the second half of 2011 the severe tensions in the financial markets, fuelled by worries about the sustainability of the public finances of some euro-area countries, also involved Italy and affected the prices of Italian government securities. The need for repeated budget adjustment measures was accompanied by an overall worsening of the economic situation. During the year Molise increasingly felt the impact of the deterioration in cyclical conditions. According to the latest estimates by Prometeia, the region's GDP stagnated compared with the previous year.
Industry registered a moderate drop in orders and production. The decline, reflecting the scant international openness of regional manufacturing and the weakness of domestic demand, was more pronounced in the traditional sectors of specialization, where structural problems persist. Exports of food products only partly offset the large decline in fashion exports, with a contribution from exports of pasta products.
Construction remained at historically low levels, suffering from the prolonged weakness of residential building. House sales revived a bit, but the number of transactions was still about a fifth lower than the level reached in the first phase of the financial crisis.
In services, provisional data suggest that there was a decline in retail sales, with a large drop in those of durable goods. The tourism sector alone showed signs of improvement.
In the labour market, demand continued to be weak. The fall in employment was sharpest in construction; it was especially large among men and in payroll employment. Recourse to wage supplementation increased again in 2011, pushed up by the large number of hours of special benefits and benefits granted under waivers.
The crisis has led to a sharp reduction in job openings for young workers, together with an increase in the number of young workers holding jobs for which they are overeducated.
Lending to the economy stagnated in Molise in 2011 and then diminished in the first few months of this year. Lending to households grew moderately, restrained by lower demand for house purchase loans; another factor in this development was the tightening of supply conditions, which took the form of an increase in the cost of financing.
Bank lending to firms contracted more rapidly in 2011 than in the previous twelve months, to a greater extent for smaller firms. The weakening of economic activity lessened firms' demand for financing; most of their applications for loans were in connection with debt restructuring or the need to finance working capital. Supply factors were also in play, in the form of more unfavourable cost conditions and more severe lending standards.
Although the flow of new bad debts on loans to households and firms declined again, the year saw a gradual increase in credit lines registering temporary repayment difficulty, a reflection of the progressive worsening of the cyclical situation.
