Positive signs for the Italian economy from GDP and inflation. Furthermore, the Moody’s rating agency yesterday confirmed its “Baa3” rating with a stable outlook as it estimates that “an acceleration of the implementation of the Pnrr will support improvements in growth to 2026”. Obviously a challenge is represented by the deficit/GDP which, due to the Superbonus, jumped to 7.6% in 2023. Moody’s estimates a decline in the indicator to 5.6% in 2024, to 4.2% next year and to 3.2% in 2026.
In the meantime, we can count on a recovering economy. The cooling of prices contributed to the recovery in consumption which boosted the gross domestic product. In fact, in the first quarter of 2024, GDP increased by 0.3% compared to the previous three months and by 0.7% compared to the same period of 2023. This was announced yesterday by Istat which confirmed the economic growth, revising the trend upwards, which stood at 0.6%. The growth achieved for 2024 stands at +0.6% from the 0.5% previously estimated. GDP growth is due to household consumption and investments, which provided a positive contribution of 0.2 and 0.1 percentage points respectively. Value added increased by 3.3% in agriculture and by 0.3% in both industry and services.
The evolution of consumer prices is encouraging. In May, inflation increased by 0.2% on a monthly basis and by 0.8% annually, as in the previous month. Core inflation drops by 0.1 points to 2%, while acquired inflation for 2024 is equal to +0.8% for the general index and +1.8% for the core component. The prices of processed food goods are slowing down (from +2.5% to +2.1%) and of transport-related services (from +2.7% to +2.4%) The evolution of inflation is less comforting in the euro area, which rose to 2.6% in May from 2.4% in April. The figure is affected by the +2.8% recorded by Germany. If the ECB’s 25 basis point rate cut is now a done deal, analysts now tend to estimate only another quarter-point reduction in 2024 with little chance of a third intervention.
A situation that leads Italy to make its voice heard. “These figures are higher than expected”, commented the Minister of Economy, Giancarlo Giorgetti, regarding the trend in GDP, specifying that “3% would satisfy me but we realize that in old Europe this is the reality”. The key word, he added, “is investing: if you don’t invest, you won’t be able to be competitive and productive.” And it is on this point that the governor of Bank of Italy intervened yesterday. If the monetary policy action was “necessary”, it must be prevented from “becoming excessively restrictive”. According to the number one of Via Nazionale, «in defining the path to reducing official rates it will be necessary to consider that timely and gradual action will allow macroeconomic volatility to be contained compared to late and hasty action».
A circumstance well explained by the Confcommercio research office. Given the same reference rates in the euro area (4.5%), inflation below 1% implies real interest rates that are not consistent with the needs for private investment to support the public resources of the Pnrr. «The residual inflationary impulses are confined to seasonal factors», continues Piazza Belli, therefore the stabilization of consumer prices is the key to a new phase of growth in consumption, essential for achieving the growth objective for the current year at 1%.
It is clear, therefore, how easing monetary policy can help. To facilitate investments, create new jobs and increase disposable income. The record employment data in April (almost 24 million people at work) cannot be self-sustaining.
