Date: 13-03-2015
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Page: 25
The turning point of the Italian Economy
by Valerio De Molli
13 marzo 2015
Finally, the first quarter of 2015 seems the one that will mark a turnaround. The signs of an increase in
sentiment emerging from our analysis are significant. The improvement in expectations first noted at the
end of last year is now accelerating sharply at a rate never seen since we began compiling the Ambrosetti
Index.
In fact, we were among the first back in December 2014 to have anticipated a potential inversion in the
trend at a time when other institutions continued to have a negative outlook.
Above all, for the first time, the figure regarding the 6-month forecast for employment has entered the
positive range. This had never happened since the creation of our Index. The combination of the Jobs Act
and favorable international scenario is clearly having a positive influence.
In fact, following 13 quarters of a decrease in Gross Domestic Product, the first quarter should be on the
plus side, with encouraging signs for the coming months.
Four main factors are exercising an influence against the crisis.
1. The intervention of the European Central Bank which, through September 2016, each month will buy
up 60 billion euros of sovereign debt of member states and other bonds held primarily by the banks
(such as covered bonds and asset backed securities), has reduced to all-time minimums—nearly to
zero and in some cases in negative—the cost of refinancing newly-issued debt for member states. For
Italy, the savings resulting from lower interest on newly-issued debt could be between 4 and 6 billion
euros in 2015. The equivalent of an entire budget package.
2. The weakening of the euro, in particular against the dollar, which is the result of divergent policies of
the two central banks (the Fed is oriented towards an increase in rates while the ECB is currently
injecting significant liquidity into the system), increases the competitiveness of Italian products
abroad, thus increasing the potential for exports.
3. Historically from the post-war period up to the present, interest rates have never been so low. For
example, the cost of financing public debt is at its lowest level ever and for 10-year BTPs (Italian
floating rate treasury bills) it is at 1.15%.
4. Finally, the significant reduction in the price of oil, the equivalent of a stimulus package through tax
breaks, through bringing down transport costs, generates the effect of an indirect reduction in costs
and increases purchasing power for an extremely large number of products and services exchanged on
the markets.
If Seneca’s dictum “If a man does not know to which port he is steering, no wind is favorable” is true,
we’d say we’re doing well, because at least the second aspect is certainly in our favor!! Now we just need
to decide which port to steer towards!
Added to this improved economic picture compared with the past, there are expectations for major
improvement. As stated above, the Ambrosetti Club Economic Indicators register values at their absolute
highest since the start of the surveys.
Our indicators include the sentiment of a selected target (our survey sample is comprised of
businessmen, CEOs and representatives of top management of leading Italian companies and
multinationals active in Italy) and with a privileged 360° perspective on business, planned investment,
sales and stock trends, new orders and changes in market outlets for goods and services.
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Date: 13-03-2015
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The first positive statistic to emerge is tied to the indicator of sentiment about the current situation of the
Italian economy. In March, it was at 26 points, the highest since October 2013 and up strongly from the
figure of 3.4 in December 2014. These numbers make us think that we have fully emerged from the
economic crisis/stagnation in which our economy has been in recent years.
However, weak points remain, at least until aggregate demand in Europe and Italy begins to recover.
Economic situation in Italy
In addition, this statistic is confirmed by the December 2014 indicator regarding future expectations
(+17.2) that shows a marked recovery.
The mid-/end-year expectations show a further economic acceleration compared with the first quarter of
2015, with the indicator at 10.4 points. It is, nonetheless, physiological that with the increase in economic
activity and the improvement of the indicators (see graph on the Italian economic situation), prospects
for further improvement do tend to decrease. The element to watch is the sign of the indicator which, as
long as it remains positive, indicates further growth.
This value, if read together with the one regarding evaluation of the economy for the 1st quarter of 2015
shows how the top management of the country's most important companies are showing significant trust
that there will be improvement and a return to growth by the end of the summer.
6-month Economic Outlook
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Date: 13-03-2015
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One of the values going against the past trend is that regarding the job market. For the first time since
the beginning of these surveys, sentiment regarding employment is positive with a value of 9.4, up
sharply from the -21.6 level in December 2014. For the first time the employment expectations indicator
is positive and shows improvement in the future.
Nonetheless, coming from a situation of 7 consecutive quarters of this indicator in decline, this value
should be interpreted as a sign of expected improvement, but not an indication that the employment
problems in Italy have been solved, especially for young people.
6-month Employment Outlook
On the investment front, after having registered a phase of stable values around zero in past quarters
reflecting the generally stagnant situation, this indicator shows a marked increase to a level of +25.0.
This value for the indicator demonstrates that prospects for increases in investment are very significant,
even if this increase should be seen in relation to current values which, it should be remembered, are at
an all-time low.
6-month Investment Outlook
In summary, our indicators show a generally positive sentiment regarding the overall economic trend,
employment and investment, at a level that has not been seen since the inception of our surveys.
However, within this positive context, caution should be exercised in interpreting it as a completely
optimistic outlook for the future.
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As Giuseppe Chiellino, member of the Ambrosetti Club and Managing Director of Ceva Logistics, leading
company in the world in logistics and transport, tells us, these positive signs must be confirmed over the
coming months. Only then could we begin to think of a long-term and sustainable increase in investment
and employment.
Before investing, multinationals need to have a consolidated growth trend or direction that could foster
confidence in stable growth for the near future. Regarding this, there are other countries and areas of the
world that are more attractive than Italy and Europe.
Fundamental is certainty regarding the regulatory framework and laws. Investment is planned with an
economic return to be realized in two-to-three years. Within this context, it is essential that some
aspects, such as taxation, work legislation and justice fall within a framework of future certainty and
stability.
In logistics, as in any other sector that works with tight margins, when positive signs emerge, the first
area to be worked on is productivity in order to meet new demand and, if demand actually increases, only
secondarily on building up the workforce and planning new investment.
Giuseppe Chiellino underscores the importance the drop in the price of oil has had on the sector which
increased margins for companies and reduced the cost of transporting goods.
The weakening of the euro/dollar exchange rate also aided companies in the logistics sector, especially
those with international reach who are not only involved in national transport but also deal with exports.
Highly-positive—and to a certain extent unexpected—signs were seen in the forklift truck manufacturing
sector, equipment used by the large retail chains and in industrial storeyards for moving merchandise.
Leonardo Salcerini, also an Ambrosetti Club member and CEO of Toyota Material Handling Italia, offers
this statistical overview of the trend in his sector: +15% from last year and +20% in the first two months
of 2015. Until just a few months ago, such a marked growth in the first two months of the year was not
expected.
Given the nature of the product that Toyota Material Handling Italia sells, this growth can be interpreted
primarily in two ways: as an important sign of restructuring and increase in efficiency of large-scale retail
chain outlets that creates room for improvement and growth in the future; and as a sign of growth in
company warehouses as a result of increased orders or expected increase in sales, especially on the
export front.
Leonardo Salcerini is also cautious regarding the speed with which economic growth can be translated
concretely into an increase in employment. Once again in this sector, the initial response following years
of crisis to an increase in demand is to increase efficiency and improve production processes. If the trend
continues, new hirings and investment could be taken into consideration.
And finally, within this context, every element that adds flexibility to the system is seen positively and
makes it possible to bring companies into line with market needs more rapidly.
PRESS REVIEW