The interviews for the latest Banca d'Italia – Il Sole 24 Ore survey on inflation and growth expectations were carried out between 3 and 24 September 2012. A total of 773 firms with 50 or more employees took part, of which 413 operate in industry and 360 in services.
Main findings
Inflation expectations in Italy and change in companies’ selling prices
The expected rate of consumer price inflation for the 6-month time horizon was revised slightly downwards compared with the June survey (from 3.4 to 3.3 per cent); the expected rates for the 12-month and 2-year time horizons remained slightly above 3 per cent and continued to be higher than the corresponding forecasts by professional analysts. In September the twelve-month rate of increase in consumer prices was 3.4 per cent, which was 0.8 percentage points higher than had been expected in the year-earlier survey.
Firms estimated that their selling prices had risen by 1.6 per cent in the last twelve months, slightly down on the 1.8 per cent increase reported in the June survey and in line with the 1-year forecasts of the September 2011 survey. The biggest increases were recorded among large firms (1.9 per cent). For the next twelve months, firms continued to expect they would raise their selling prices by 1.3 per cent. Among the factors that will influence the rate of increase in prices, firms gave increased importance to raw materials prices and labour costs; the moderating influence of the change in demand was slightly more pronounced than in the June survey.
Assessment of the general economic situation
During the summer pessimism regarding the general economic situation diminished, after increasing very significantly in June: the proportion of firms indicating that conditions improved rose from 2.5 per cent in the June survey to 6.4 per cent and there was a sharp fall in the proportion reporting a deterioration in conditions, from 69.9 to 50.6 per cent. The balance between positive and negative assessments was less unfavourable for firms in the North-West and services and for large firms. Although they remained a majority, the proportion of firms that saw zero probability of an improvement in the general economic situation in the next three months also declined, falling from 58.4 per cent in the June survey to 52.3 per cent.
Demand
Firms’ assessments of the total demand for their products in the last three months also became less unfavourable: the negative balance between expectations of an increase and a decrease narrowed from 33.5 percentage points in the June survey to 27.6 points.
About one third of exporting firms reported an increase in foreign demand compared with the three preceding months, as against just over one fifth that reported a decrease. Expectations for the next three months are favourable: about 30 per cent of exporting firms expect demand for their products on foreign markets to increase, compared with 15.7 per cent that expect a decrease.
Assessment of firms' business conditions
The proportion of firms expecting their business conditions to deteriorate in the next three months fell from 41.4 per cent in June to 37.1 per cent; at the same time there was a small increase in the proportion of firms expecting an improvement, from 3.6 to 5.8 per cent. Although it narrowed compared with the June survey, the negative balance between firms expecting improvement and deterioration remained at the high level of the five previous quarters. Among the factors that will have an unfavourable impact on the economic environment in which firms operate, there was virtually no change in the importance attributed to raw materials prices, credit conditions and labour costs.
For the longer term, there was a significant increase, from 55.3 per cent in June to 61 per cent, in the proportion of firms expecting conditions to improve over the next three years. The most favourable assessments were made by firms in the North-West and by those with at least 1,000 workers.
Conditions for investment
The proportion of firms expecting worse conditions for investment in the next three months fell sharply, from 49.7 per cent in the June survey to 37.5 per cent. Consequently, the negative balance between the firms expecting worse and better conditions contracted from –47.4 percentage points in the June survey to –31.6 points.
Firms’ liquidity and access to credit
Firms’ assessments of their liquidity positions in the next three months did not vary significantly compared with those reported in the June survey: about a quarter of firms expected their liquidity to be insufficient and 63.4 per cent expected it to be barely sufficient. The picture appears more favourable for large firms.
The proportion of firms reporting a decrease in their bank deposits on a seasonally adjusted basis rose from 42.8 per cent in the June survey to 44.9 per cent. The decline in deposits was due principally to the contraction in firms' revenues and, to a lesser extent, to difficulty in accessing bank credit.
A growing number of firms reported that their credit conditions had remained unchanged compared with the previous quarter (72.2 per cent against 65.1 per cent). The proportion of firms reporting an improvement in their credit conditions remained negligible.
Workforce
Just over two thirds of firms expected their workforces to remain unchanged in the next three months. There was a further increase of nearly 2.5 percentage points, to -18.2 points, in the negative balance between expectations of an increase and a decrease in employment; the gap was especially wide for large firms (-24.9 percentage points).
