Industry stopped and construction too. But the government continues

Exports collapse, domestic orders decrease, turnover drops and industrial production slows down. In short, it is the photograph of the Milanese economy taken by the general secretary of the CGIL Milan, Luca Stanzione. «It is the first time since the post-pandemic that all the indicators and trend data are negative. Something is broken: the Milan model is entering a crisis.” And he adds that in the second quarter of 2024 the hours of authorized layoffs approached 4.5 million. Manufacturing is suffering above all: «49 percent of the redundancy fund was used by the metalworking industry and it is not a good sign because this area risks losing its productive vocation. Milan cannot live only on tourism, events and real estate, ephemeral development assets, devoid of quality work. While metalworking, linked to research, innovation and digital, is the richest sector and if it goes into crisis it will drag the entire Northern economy with it, as is already happening.”

If the government flaunts an economy that is holding up – with GDP growth below 1% – and growing employment – in numbers, but not in the number of hours worked – they are Federmeccanica’s data is worrying: in the second half of the year production fell by 1.5% compared to the first quarter and worsened by 3.4% compared to last year. Exports are down 3.2%.

Foundries, which are the source from which metalworking companies obtain their supplies, are in technical recession: production is -8.9% trend and -3.1% cyclical. A decline in foundries indicates a slowdown in all manufacturing and for this reason the president of Assofond, Fabio Zanardi, has urgently asked the institutions for measures to reverse the trend. Instead the government says that everything is fine, that Italy is growing. Really Prime Minister Giorgia Meloni is committed to asking Europe to postpone the Green Deal, with incredible blindness: if the other superpowers push for electric, slowing down the transition means losing further competitiveness. The foundries also understood this: «The greater gradualness towards the transition must not lead to relaxation. The transition remains an extraordinary factor of competitiveness and investments to protect the environment have led our companies to be excellent», says Zanardi (unheard). Indeed, the new regulatory framework resulting from the Agriculture-Environment ministerial tandem is translating into one stop for the national chain of renewable electrical technologies, i.e. for the construction of wind and photovoltaic parks, which are supplied by a local industry producing wind turbines, which in ’23 alone generated a turnover of 10 billion. Now this too risks becoming established.

In light of all this, they are worrying, but not surprising, the terrible results of Stellantiswhich opened the redundancy fund tap to its maximum: «The vehicles produced this year are 387,600, compared to 567,525 last year. Precisely cars recorded a minus 40.7%, commercial vehicles minus 10.2%. And even the only two plants with positive results in the first part of the year, Pomigliano d’Arco and Atessa, recorded negative data”, says Ferdinando Uliano of Fim Cisl, remembering the car strike of October 18th, to wake up the Roman buildings.

After all, GDP is growing. Albeit just a little. How is this possible? Fedele De Novellis, economist and partner of Refexplains to L’Espresso that «in Italy, but also in other European countries, the industry is affected by factors linked to demand (for example, monetary policy does not facilitate investments nor the consumption of durable goods, as well as the loss of positions of the German industry) and of new consumption trends, typical of the post-pandemic period, which reveal a greater propensity of consumers to spend on services, tourism, non-durable goods. In the United States, they are even studying Swiftlation, the inflation that occurs in the cities where singer Taylor Swift performs: mini inflationary booms are observed in various urban centers in the presence of major events. Beyond the specific case, in fact, it is true that there is a thriving economy that revolves around concerts, events and matches. In other words, priorities have changed: people change cars less, people don’t save for their first home, but they spend more on holidays and self-care.” A phenomenon that is contributing to slowing down demand on Italian and European industry.

If Italy is not yet in recession it is thanks to the construction asset and services: «The sword of Damocles of the Superbonus hangs over the prospects of public finances, which has affected the public deficit. However, the accounting effect on the debt will only appear between 2024 and 2027, given that in that period the tax credits that reduce the state’s cash receipts will be exercised. In the meantime, there is no doubt that precisely those generous incentives differentiate us from the crisis faced by the rest of Europe.” In detail, the Ref economic report says that the added value of manufacturing decreased by 0.5% compared to the first quarter (minus 0.7% trend), while the growth rate of construction was very high until 2023, but highlighted a setback in the first part of this year. Growth was guaranteed by a very weak +0.4% in services. The sum of these three sectoral trends leads to «an economy that is little better than stagnation, which moves just a few tenths above the decimal point, and is particularly fragmented internally. So we have parts of the industry, especially cars, textile and clothing supply chains, which are doing very badly; tourism is holding up well, even if it slows down compared to last year’s performance; and there is the unknown of construction”, which could fall in parallel with the end of the bonuses, given the very poor results for the first part of 2024 already certified by Istat.

The Italian economy is particularly sensitive to public incentives: for example, in the first part of the year, business investments were slowed down by delays in the implementation of the Transition 5.0 plan by the Ministry of Made in Italy, and this pushed companies to postpone investment plans while awaiting incentiveswhich came into force in August. This has created an ordering problem for the industrial automation industry. The Meloni government has decided for 2025 housing bonus return to 36%reversing the course taken by the Monti government, which had raised the deductions to 50% to interrupt the consolidated practice of illegal activity in construction, and accentuated by Conte with the 110 bonus. «It may be that in the next few quarters we will see a contraction in construction, if it is not compensated by the implementation of the infrastructures included in the Pnrr», which however appear to be late, given that to date only 26 percent of the resources have been spent and there is no detailed monitoring of the progress of the measures.

Furthermore, on the internal demand front, the delay in the heaviest contract renewals, above all that of mechanics, leaves little hope for the possibility that it is the consumption of Italian families that is driving the economy, as noted Albino Russo, director of Coop and editor of the Coop Report, according to which families have returned to incomes comparable to those of 2019 in real value, but adding 1.6 billion hours worked. «It means that per capita income from employment is 4% lower than in 2019 and that there are sectors, for example in public employment, healthcare and education, in which the gap is more than ten points compared to five years ago»says Russo, who adds: «In the economy of the individual family, everything depends on how many people work and all this effort in maintaining income is reflected in the world of consumption, which is hostage to obligatory expenses (healthcare, utilities, household expenses ) and manifest themselves in creeping deconsumerism.” In no uncertain terms, the Coop Report breaks down some old myths – houses, cars, mobile phones – which have kept a large part of the industrial economy going and which no longer hold up.

In this unstructured scenario, it peeks out the economic maneuver which, in addition to the risky reduction of tax bonuses, aims to increase excise duties on diesel (contrary to what Prime Minister Meloni promised when she was in opposition). And not only that: «We will approve a maneuver that will require sacrifices from everyone», the Minister of Economy, Giancarlo Giorgetti, thundered in recent days. We’ll see how the citizens take it. Even more so the margins for maneuver are more stringent than usual because the government’s structural budget plan is based on the (obligatory) tracks of the new rules of the Stability Pact. After the large expansion of public deficits to counteract the recessive effects of the pandemic, we are returning to public budgets that are sustainable in the medium term, which they commit the current (and next) government to corrections of 12 billion per year for the next 5 years, as well as reforms and investments aimed at restoring finances for the next 7 years. This year the extra 9 billion in revenue will be totally absorbed by the correction of the balances envisaged by the Stability Pact. Giorgetti intends to make the fundamental measures of the maneuver structural – the 15 billion for the decontribution for incomes up to 35 thousand euros and to confirm the Irpef in three rates – to which are added the allocations for the renewals of public contracts and the healthcare. All for a 25 billion maneuver. But this time Europe requires that spending reduction measures and revenue interventions must be financed by certain and lasting coverage. On the horizon, however, there are no elements of support for the real economy, despite the country’s stagnation and the slowdown in industry. If companies do not offer new revenue to the Treasury, the focus is on citizens’ pockets, as in the case of excise duties on diesel and the failure to revalue pensions.