The second confirmation for the Italian rating arrives. After S&P, Fitch also reiterated its opinion, leaving it unchanged at BBB with a stable outlook. The Italian economy is sufficiently large and diversified, but Italian debt remains high, fiscal policy shows signs of easing after the pandemic, and yields have risen. The Meloni government is proving to be more stable than its predecessors, but even in this case there are some shadows: the executive must in fact face “considerable political pressure to maintain electoral commitments”, observes Fitch, and this weighs on the prospects of a greater consolidation, “as evidenced by the pension reform measures rejected by the coalition”. With the maneuver being tested by Parliament, Italy still receives confirmation, awaiting the final, fundamental judgment from Moody’s which will arrive in seven days. A certain degree of uncertainty therefore still remains also because on a macroeconomic level the picture does not appear rosy: industrial production declines, rates on loans and mortgages remain high and public debt remains a burden for Italy, “a source of vulnerability – according to the general director of Bank of Italy Luigi Federico Signorini – of our economy” and a “only marginal” decline in the coming years. Istat speaks of “uncertain prospects”. Mortgages and loans – explains Bankitalia – continue to decline for families (-0.9%) and businesses (-6.7%). And the artisans of the Cna say they are very worried about the credit crunch. As regards industrial production, the data leaves no doubt: zero growth in September compared to August and -2% compared to September 2022 even if on average in the third quarter the level of production increases slightly: 0.2% compared to the three previous months. It is always consumption that goes badly and has an impact: the monthly index drops for consumer goods (-2.2%). In trend terms, the index drops by 6.5% for the production of consumer goods. Consumers are alarmed: Codacons points the finger at the increase in prices, especially for families. the UNC underlines the worst trend for consumer goods. Therefore there are all the signs for a sharp slowdown: “the international economic prospects remain very uncertain, conditioned by the worsening of geo-political tensions and unfavorable financial conditions for families and businesses”, explains Istat again, recalling that “in October , household and business confidence continued to decline, suggesting that the Italian economy could slow down in the coming months.” Families and businesses that struggle even just to get a mortgage or loan: in September loans to the private sector – says Bankitalia – decreased by 3.6% over twelve months (-3.4 previously). Loans to families fell by 0.9 percent over the twelve months (-0.6 in the previous month) while those to non-financial companies fell by 6.7 percent (-6.2 in the previous month). The only, very small, consolation was the micro-reduction of interest rates on mortgages to families which, including ancillary expenses (TAEG), stood at 4.65% (4.67 in August). Still nothing if we consider – explains Codacons – that today a variable mortgage costs up to +4,400 euros in 2021″. Furthermore, tensions continue to push on government bonds. It is no coincidence that demand was strong in the BTP auction (9 billion placed) and yields have fallen but still remain at high levels (30 year yields have a gross of 5.05%).
US Treasury’s anger against Moody’s, ‘our economy is strong’
The US Treasury says it disagrees with Moody’s decision to downgrade the US outlook to negative. “Our economy remains strong” and Treasuries are the safest asset in the world, the Treasury says.
Moody’s confirms the US ‘Aaa’ rating but cuts the outlook to ‘negative’ from ‘stable’. The agency stated this in a note, underlining that the increase in downside risks on public finances is what drives the revision of the outlook. Moody’s expects the deficit to remain high and believes that the split in Congress will make it difficult to reach a consensus on a debt plan.
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2023-11-10 22:55:00
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