Flash conjuntura Centro Studi Confindustria December 2018

The flash conjuncture of the Confindustria Study Center in December 2018 shows a decrease in global trade: -1,1% in September and global PMI orders below the 50% threshold in October-November. The US protectionism and the geo-political tensions in the Middle East also affected this fact.

Italian GDP remains weak in the 4 quarter (after the -0,1% in the 3 °). Industrial production grew just in October (+ 0,1%), but domestic demand remained weak. The downturn in both consumption and investment in the 3 quarter, confirms the expectation of a sluggish dynamic even in the 4 °. Italian exports of goods and services recorded + 1,1% in the 3 quarter, according to national accounting data. In October, according to customs data, non-EU sales rebounded strongly (+ 5,3% monthly) after the September fall (-2,8%). However, the outlook for exports in the 4 quarter is negative according to the qualitative indicators on foreign manufacturing orders (SMEs and judgments of the ISTAT companies). The employment recovery has come to a halt since June: in October the number of employees remained stationary, after -0,2% in the 3 quarter.

With regard to the Eurozone, qualitative data show that the weakening of euro area growth could extend to the 4 quarter. Little expansion of manufacturing due to the reduction in orders, which is affecting the services. Moreover, the pessimistic expectations of consumers on the labor market and the economic situation could presage less support from domestic demand, which would add to the weak contribution of the foreign one. Expected rate inflation is expected: from the 2019, therefore, the cost of credit could grow.

Instead, the US is recording growth signals in the 2018. Data on claims for unemployment benefits, higher than expected and rising for several weeks, have attracted the attention of analysts, but the unemployment rate is still at historic lows (3,7% in November). The Fed is waiting for a new rise in the short-term rate, the December 19; the flattening of the rate curve, with signs of an inversion (those at 2-3 years slightly higher than the one at 5), indicates that markets anticipate a slowdown in the economy in the next year.

In the United Kingdom, braking signals. The pound remains devalued and the confidence of British consumers is falling. Business confidence is also low and the Pmi index for services at the lowest level has dropped since July 2016. This reduces the growth expectations in the 4 quarter, after the good result of the 3 ° (+ 0,6%).

Oil price fall (The Focus of the month)

The price of oil has registered a large decline in the last 2 months: from the peak of 86 dollars to the barrel touched at the beginning of October, we reached 62 on average at the beginning of December.

The US blockade of Iranian oil exports began in November, with sanctions also on non-American companies that trade with Tehran and have relations with the United States. Some countries, including Italy, have been granted an 6 month exemption. Among the suppliers of Italy, Iran occupies the third place, with a share of 12% in the first eight months of the 2018. Although Italy buys from 23 countries, a crucial issue is how quickly other supplier countries can take over Iran to sell the share of oil needed by the domestic industry and household energy consumption.

So far, the OPEC extraction has even grown (+ 0,3 mbg in October from April), although it is also continuing the slow decline of another historic member such as Venezuela. Thanks to the strong expansive trend of the US extraction, in the world crude oil market, after the summer, there is again an excess of production (of 1,4 mbg on average in September-October). Until August, however, the demand was higher than the offer (of 0,3 mbg in the first 8 months of 2018). The accumulation of stocks, after the decline of the OPEC in the 2016-2017, explains the sharp fall in prices. Meanwhile, Qatar has decided to exit the OPEC from January 2019, for disagreements with other member countries on geo-political issues. However, Qatar is one of the minor members of OPEC, less important than Iran, Iraq and Saudi Arabia.

Iran is also a good market for exports of Italian goods: the share of Made in Italy on Iranian imports is equal to 3,8%. It could almost double if you could fully express its potential. However, given that oil exports account for around 90% of Iranian exports and a significant share of GDP, sanctions could quickly bring the country into recession, reducing its demand for foreign goods. This represents a major challenge for Italian exporting companies.

According to Csc estimates, based on the econometric model, a permanent decline of 10 Brent dollars can generate a greater increase in Italian GDP by + 0,1% in the first year. However, in the current context of high uncertainty, there is a risk that the lower energy expenditure of households and businesses will end up in savings and liquidity, not supporting growth.

Below is the official document attached

Of interest to:
Sistema Confindustria
CF December 2018.pdf583.57 KB

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