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 20 March 2012. A total of 742 companies with 50 or more employees took part, of which 386 operate in industry and 356 in services.
Main findings
Inflation expectations in Italy and change in companies’ selling prices
The expected rates of consumer price inflation show a decrease compared with the December survey that was slightly less pronounced for the 6- and 12-month time horizons, for which the rate fell to 3.2 per cent, from 3.3 and 3.4 per cent, respectively; it was sharper for the 2-year time horizon, for which it fell from 3.4 to 3 per cent. The projections are higher than the corresponding forecasts by professional analysts, especially for the long term. In March the twelve-month increase in consumer prices was 3.8 per cent, 1.5 percentage points higher than expected in the year-earlier survey.
Businesses reported that they had raised their selling prices by 1.7 per cent from a year earlier, 0.4 percentage points less than reported in the December survey. The increase was basically in line with the figure firms had expected twelve months earlier. Larger increases were reported by firms located in the Centre (2.5 per cent).
For the next twelve months firms expect to raise their selling prices by 1.9 per cent, as against the forecast of 1.7 per cent in the December survey. The increase in selling prices will be driven mainly by raw material prices, while the pricing policies of firms’ main competitors will act as a brake.
Assessment of the general economic situation
There was a sharp increase in the percentage of firms that reported an improvement in the general economic situation (from just under 2 per cent in the December survey to 17.5 per cent), while the proportion of those that reported a worsening fell from about 75 per cent in December to 41.5 per cent. The negative balance between expectations of an improvement and a deterioration declined for the first time since March 2011. The proportion of firms reporting an improvement in the general economic situation was higher in the North-West and among large firms.
Compared with the previous survey, there was a reduction from 52.4 to 40.4 per cent in the proportion of firms that saw zero probability of an improvement in the general economic situation in the next three months.
Demand
Firms’ assessments of the demand for their products in the last three months were also more optimistic: the negative balance between expectations of an increase and a decrease fell from 34.3 percentage points in the December survey to 28.4 points. Although still negative, the balance improved with the proportion of turnover generated on foreign markets.
Exporting firms’ assessments of the demand for their products on foreign markets were basically unchanged compared with the previous quarter: about one quarter of firms reported an improvement, while another quarter reported a reduction. There was a slight improvement in exporting firms' expectations for the next three months: the proportion of those expecting an increase in foreign demand for their products rose from 28.2 to 32.1 per cent, while the proportion of those expecting a decrease declined from 15.1 to 12 per cent.
Assessment of firms’ business conditions
The proportion of firms expecting a deterioration in business conditions in the next three months fell sharply, from 50 per cent in the December survey to 31.1 per cent. Although to a lesser extent, that of firms expecting an improvement rose, from 5.2 to 9.6 per cent. Among the factors expected to influence business conditions in the next three months, the most important remains the virtually unchanged negative impact of raw material prices and credit conditions.
The percentage of firms expecting an improvement in business conditions over the next three years rose from 48.4 per cent in the previous survey to 59 per cent. By contrast, 19.3 per cent of the firms surveyed expected business conditions to worsen, against 29.6 per cent in December.
Conditions for investment
The percentage of firms that reported a worsening in investment conditions in the last quarter. showed a large fall to 36.5 per cent, from the 66 per cent recorded in the previous survey. The balance between firms expecting an improvement and those expecting a deterioration remained negative but fell to 26.1 percentage points, from 60 points in the previous survey.
Firms’ liquidity and access to credit
Firms’ assessments of their liquidity in the next three months did not change significantly compared with the December survey: 27.8 per cent expected it to be inadequate, while 60.5 per cent expected it to be adequate. The outlook appeared more pessimistic for small firms.
In this survey businessmen were asked whether, excluding normal seasonal fluctuations, their bank deposits had decreased during the last quarter. Some 45.1 per cent of firms reported a contraction, which was mainly due to the reduction in revenues. This phenomenon appears to have been less pronounced for large firms (23.1 per cent).
The proportion of firms reporting that their conditions of access to credit had deteriorated in the last three months declined to 33.9 per cent, from 49.7 per cent in the previous survey. The percentage of firms reporting an improvement remained low, rising from 2 per cent three months earlier to 3.7 per cent.
Employment
The proportion of firms expecting their employment to remain unchanged in the next three months remained stable at about two thirds. The negative balance between expectations of an increase and a decrease narrowed from –16.9 to –9.5 percentage points.
