Analysis of main results as of 1st quarter 2004
The international economy: an economic boom which does not catch on in Europe

During the first quarter of 2004 the international macroeconomic picture featured markedly diverse situations: despite the recovery is taking hold in the United States and Far East Asia, as a matter of fact, economic activity in the Euro Zone remains at moderate growth rates. The appreciation of the single currency reduces positive impulses from foreign channels and contributes to deteriorating businesses’ and consumers’ confidence.
According to the last national financial figures covering the 1st quarter of 2004, the US economy is “travelling” at annual GDP growth rates of 4.2% (CsC May 2004), especially sustained by American household expenditure (in April the University of Michigan said consumers’ confidence was 94.2, which was essentially in line with the analysts’ forecasts) and by cyclical fixed investments being resumed, supported by the marked increase in company profits. The latest developments in the US job market are positive too (+288,000 contracts in April, with a decreasing unemployment rate at 5.6%, always according to the May 2004 CsC estimates).
At forecast level, the estimates issued in April 2004 by the International Monetary Fund show that the American GDP growth rate might settle at 4.6% in 2004, compared with 3.1% in 2003, to reach 3.7% in 2005 (Ref. irs Trends, May 2004).

On the other hand, developments in the Euro Zone: are showing to be less favourable than expected: after the economic recovery recorded in the second half of last year, the last figures available reveal a certain weakness of the economic activity at the beginning of the year.
In February 2004, as a matter of fact, industrial production grew cyclically by 0.1% after the January slump (-0.3%), and by 1% at trend level, which was matched in March by a deadlock in business and consumer confidence. The recent OECD estimates (Sole 24 Ore 25/05/2004) show that the EU’s GDP should grow in 2004 by a 1.6% percentage, with acceleration forecasts reaching +2.4% only in the course of 2005.

According to Istat’s preliminary estimates on the first three months of 2004, Italy shows slight signs of cyclical recovery despite the level of activity is still weak: the GDP’s cyclical growth is +0.4% with respect to the last quarter of 2003, +0.8% the trend growth. The Italian GDP’s growth forecasts issued by OECD are +0.9% for 2004 and +1.9% for 2005, showing that the positive cyclical turning point for our country should be starting (the conditional is obligatory) only in the second half of 2004.
A comparison between the level of industrial production in Italy and in the rest of the Euro Zone, with respect to the first few months of 2004 (The Economist’s figures of 15/05/2004) highlights the following aspects:

• in February 2004 Italy records an increase in industrial production of 0.2%, which is lower than the rest of the Euro Zone (+0.6%). Countries such as Spain, Belgium and France, in particular, in March 2004 record decidedly higher growth percentages (+8.0%, +5.4% and +1.5% respectively);
• only Germany had a “worse” performance in March 2004, recording –0.7%, which was brought about by the persistent weakness in internal demand and by export difficulties connected with the crisis in important market outlets.

The Treviso manufacturing industry: cyclical situations and forecasts for the next 6 months

The new cyclical survey on Treviso’s manufacturing industry is the result of a review of the sample business interviews by the Treviso Chamber of Commerce in cooperation with Unioncamere Veneto and with the technical support of Questlab s.r.l., aimed at monitoring in a more representative way the cyclical dynamics in the manufacturing sector.
The provincial sample was raised from 100 to 260 businesses for a total 17,500 staff; part of the regional business sample through which Unioncamere works out the estimates for manufacturing sector trends in the whole Veneto region.
Out of these 260 businesses:

• 136 have less than 50 employees with a total 2,847 employees (21 employees/unit);
• 124 have more than 50 employees with a total 14,653 employees (118 employees/unit).

Although the reference sample was modified, comparisons with the past remain critical. The picture which emerges from this first survey is still a deadlock situation, some signs of improvement compared with 2003 figures notwithstanding. The production trend variation remains negative, despite a less marked decrease with respect to the figures which were issued in the last quarter of 2003 by the previous survey: –1.0% was the figure for the 1st quarter 2004 (-2.1% on the 4th quarter 2003, -2.4% on the 3rd quarter 2003, -2.4% on the 2nd quarter 2003, -1.0% on the 1st quarter 2003).
The quarterly production variation, however, is positive at +5.5%, an impulse which does not seem to have any follow-up if one focuses on the forecast referred to this indicator: the share of businesses who indicated stagnation is the relative majority (43%), while pessimistic opinions (30%) prevail on positive ones (27%).
Slightly better dynamics are shown by the trend variation in turnover at +1.7%, compared with –0.7% of the 4th quarter of 2003; this was probably due to new factory orders, whose increase we had pointed out in the last quarter.
The quarterly turnover variation is also positive at +7.2%; the majority of entrepreneurs agree on an increase in turnover in forecast terms. 36% of them are optimistic against 31% pessimists and 33% statical; the fair division of opinions significantly symbolises a “leopard spot” crisis situation which has become the “leitmotiv” of our comments.

A critical aspect is highlighted when one examines the increase in overall production costs (+2.9%) - which was certainly due to an increase in the price of raw materials such as oil and steel . The quarterly variation in new factory orders form the home market is weak at +0.7%, whereas the increase by +13.0% in new factory orders from the foreign market is surprising. This figure might be influenced by the recent weakening of the Euro against the dollar, but it calls for double-checking at a later stage.
A confirmation of a certain movement in foreign demand seems to emerge from the forecasts by Treviso’s entrepreneurs: the share of judgements of stagnation (38%) remains significant, but positive opinions (37%) decidedly prevail on pessimistic (25%) ones.
However, the weakness of domestic consumption seems to be confirmed also by the forecasts: 40% of interviewees indicated stagnation and just 26% indicated an increase in home demand.
As regards sector dynamics, the business outlook appears to be particularly negative for the textile-clothing sector with a decrease in production at trend level (-6.2%) affected by seasonal factors; the turnover is holding steady (–0.5%) and new factory orders from the home market are +2.9%.
The woodworking industry records a slight increase in the production trend variation (+0.7%), matched by a more decisive increase in turnover of +2.4.
The machinery sector confirms its competitiveness: +3.0% the production trend variation, +5.0% the variation in turnover year on year; quarterly variations in new factory orders show a 4.4% increase from the home market and 3.5% from the foreign market.

Francesca Piscopo
Excerpt from "The Economy of the Treviso Area", August 2004