(Finance) – “The latest economic information is less good than expected. The declining profile of industrial production highlights the difficulties of a significant part of our business system. In May the fragility of consumption is also confirmed with a change in the ICC of – 0.3% both compared to the previous month (seasonally adjusted estimate) and compared to May 2023. The worsening in car sales and a declining trend in attendance starting from April (provisional evidence) were not compensated by favorable signs in the rest of the basket purchasing power by families. In short, as we feared a few months ago, services and tourism may not be enough to get spending back on track.” This is the scenario outlined by Confcommercio economic situation for June.
Among the positive aspects – notes Confcommercio – the improvement of the labor market which could, in the absence of stronger economic dynamics, show some signs of a slowdown in the final part of the year. L‘inflation proves to be largely under control: Confcommercio’s estimate for June is one change of 0.2% cyclical and 0.9% on an annual basis. “The cut in reference rates by the ECB – underlines Confcommercio – was lower than our expectations. Therefore companies, especially Italian ones, are dealing, and seem to have to do so for a long time, with particularly high real interest rates. We must therefore focus everything on the stability or further reduction of inflation, a profile that would strengthen the purchasing power of labor income and, in a context free of significant shocks on employment, consolidate a path of growth of consumption, with consequent support for GDP. As we can see, as the months pass, the objective of achieving a change in GDP of 1% or just above requires increasingly stringent conditions”.
There estimate for the second quarter of the current year for GDP it is moderately negative in economic terms (-0.1%) and the trend change is still at 0.7%. “This stop – highlights Confcommercio – could be overcome thanks to services and, again, tourism in the broad sense – transport, culture, accommodation and catering – starting from July”.
In May 2024 the Confcommercio Consumption Indicator (ICC) showed a reduction of 0.3% compared to the same month of 2023. The decline in the last month – explains Confcommercio – is a synthesis of the persistence of negative dynamics on the demand side for goods (-0.6% in the annual comparison) and a modest decline in that relating to services (-0.2%). The fragility of the demand for the law also depends on the economic dynamics that emerge from the seasonally adjusted data. In fact, in the comparison with April there was a decline of 0.3%, a synthesis of drops of 0.4% for goods and 0.1% for services.
Estimates for May 2024 show a general slowdown trend. In this context, the behavior of families seems to indicate a situation in which, having substantially completed the process of recomposition of the shopping basket, the dynamics of demand are starting to take on a less emergency tone, moreover independent of the variable holidays. The automotive sector it returned, after the rebound of the previous month, to show a clear decline in demand (-10.8%). The wait for the start of the incentives may also have had a bearing on this trend. However, they are confirmed in positive territory air transport (+12.7%) ei communications goods and services (+5.7%). Among the other consumer segments, positive dynamics are found for home appliances (+3.1%) ei fuels (+1.7%). The very modest improvements recorded, in the annual comparison for thefood (+0.2) el‘clothing and the footwear (+0.1%) although they do not alleviate the difficult state of demand, they could represent the beginning of a less turbulent phase. A situation that does not yet seem to affect purchases of furniture and furnishing items which show, even in the last month, a clear downward trend (-2.1%). Regarding the services for the use of free time, those on which families had concentrated their efforts in recent years to return to 2019 levels, the slowdown trend, which emerged in more recent periods, also seems confirmed in May. For the hotel and public establishments sector the comparison with the same month of 2023 signals, overall, a stabilization of consumption. Regarding the demand for recreational services the downward trend on an annual basis was also confirmed in May (-0.7%). The collapse in consumption for cinema shows continues to weigh on this trend, given that in previous periods it had been more than compensated by the clear growth in demand for other forms of entertainment.
Based on the dynamics recorded by the various variables that contribute to the formation of consumer prices, Confcommercio estimates for the month of June 2024 a change of 0.2% in economic terms and a growth of 0.9% on an annual basis. Continues process of reducing inflation on food goods, segment that significantly influences families’ perception of inflation, with a rate of change in prices on an annual basis that is expected to stand at 2.1% in June. Italian inflation is confirmed to be largely under control with dynamics that appear substantially in line with those recorded in the first part of the 2000s. The hypothesis of a change in consumer prices, on average in 2024, close to 1% is therefore consolidated. The continuation of low rates of change in prices – according to Confcommercio – “could favor an improvement, in the second part of the year, in household demand, making it less complicated to achieve economic growth close to 1%”.