The interviews for the latest Banca d’Italia – Il Sole 24 Ore quarterly survey on inflation and growth expectations were carried out between 1 and 17 September 2011. A total of 486 companies with 50 or more employees took part, 279 of which operate in industry and 207 in services.
The main findings
Inflation expectations in Italy and change in companies’ selling prices
The expected rates of consumer price inflation show a decrease of 0.3 percentage points compared with the June survey for all the time horizons considered, to 2.5 per cent for the 6-month horizon and to 2.6 per cent for the 1- and 2-year horizons. The projections are higher than the corresponding forecasts by professional analysts, especially for the longer time horizons. In September the twelve-month increase in consumer prices was 3.5 per cent, 1.7 percentage points higher than expected in the September 2010 survey.
Businesses reported that they had raised their selling prices by 1.6 per cent from a year earlier, the same as in the June survey. The increase was larger than firms had expected for the following twelve months in September 2010 (1.2 per cent). The largest upward movements were among firms operating in industry and those located in the Centre.
For the next twelve months firms expect to raise their selling prices by 1.6 per cent, much less than forecast in June. Among the factors that will influence selling prices there is a slight reduction in the contribution of raw material prices and an increase in that of labour costs, while greater importance is attached to the pricing policies of firms’ main competitors in curbing the upward pressure on prices.
Assessments of the general economic situation
About two thirds of the sample firms reported a worsening in the general economic situation in the third quarter of 2011. The balance with respect to those that reported an improvement rose sharply to 62 percentage points, from 14 points in the previous survey. The proportion of firms reporting a worsening in the general economic situation was higher in the North, in services and among medium-sized and large firms.
More than half the firms surveyed saw zero probability of an improvement in the general economic situation in the next three months, as against 41.8 per cent in the previous survey. The growing pessimism was also found among exporting firms.
Demand
Firms’ assessments of the demand for their products in the last three months were less favourable: the balance between expectations of an increase and a decrease turned negative, swinging from +3.1 percentage points in the June survey to –22.2 points. The deterioration was less pronounced for large firms and those in industry.
Among exporting firms 24.2 per cent considered that the demand for their products on foreign markets had decreased, as against 20.1 per cent that reported an increase. The balance turned negative, swinging from +22.8 percentage points in the June survey to –4.1 points. There was also a deterioration in exporting firms’ expectations for the next three months: the proportion of those expecting an increase in foreign demand for their products fell from 35 to 21.6 per cent, while the proportion of those expecting a decrease rose from 5.6 to 18 per cent.
Assessments of firms’ business conditions
Compared with the June survey, the proportion of firms expecting a deterioration in business conditions in the next three months more than doubled, rising from 18.4 to 38.1 per cent, while that of firms expecting an improvement fell from 15.7 to 3.8 per cent. Among the factors expected to influence business conditions in the next three months the contribution of the change in demand fell to zero, while that, already negative, of credit conditions deteriorated further.
Although the majority of firms continued to expect an improvement in business conditions over the next three years, the proportion fell to 49.8 per cent, from 60.1 per cent in June. By contrast, about a quarter of the firms surveyed expected business conditions to worsen, against 17.9 per cent in June.
Conditions for investment
More than half of the sample firms reported a worsening in investment conditions. Compared with the previous survey the negative balance between firms expecting an improvement and those expecting a deterioration widened significantly, from –11.3 to –44.2 percentage points. More than half the firms surveyed (57.1 per cent) were of the opinion that the increased uncertainty due to the turbulence on financial markets had a significant impact on investment conditions, only 9.2 per cent of the respondents considered the impact to be negligible.
Conditions of access to credit
The proportion of firms reporting that their conditions of access to credit had deteriorated in the last three months nearly doubled, rising from 15.2 to 28.6 per cent; only 3.4 per cent of firms reported that they had improved.
Employment
The proportion of firms expecting their employment to remain unchanged in the next three months declined by 2 percentage points compared with the June survey, to 64.5 per cent. The negative balance between expectations of an increase and a decrease widened further from, –1.5 to –9.5 points.
