Falling wages and price racing. The real brake on business investment – Corriere.it

The fall in business loans, down 1.3% at the end of March (latest data available), shouldn’t worry us. However, the figures on company deposits are at higher levels than in the pre-Covid period. A liquidity that the production system probably draws on in a period of rising interest rates. In June, the average cost of loans in Europe was 3.58%, while it was 1.78% just a year ago. The fear is different and pertains to the situation of the question. Which with inflation that does not give up is destined to contract. And with it the propensity to invest by companies. That the price race is the problem is also demonstrated by government initiatives such as that of the social card from 380 euros intended for those with an ISEE of less than 15 thousand euros. A card assistance against high prices.

Even more worrying are the data provided by the OECD which indicate that at the end of 2022 real wages had fallen by 7% compared to the pre-Covid period. A decline that continued also in the first quarter of 2023 with a drop of 7.5%: a figure almost double the average of OECD countries. And this in a situation which sees, for the first time since December 2020, the fall in producer prices by 1.5% in May in the EU. A fall that was what the European Central Bank expected after its rate maneuvers. But that has not yet been reflected in the increases in consumer prices which, again at a European level in June, amounted to 5.5%. With peaks in Italy for consumer goods well over 10%. A situation, with real wages falling and prices still rising, which makes the economic framework very unwilling to invest by companies. And that would be at the basis of the fall in manufacturing activity recorded in April both compared to March (-2.1%) and compared to the same month of the previous year (-5.2%).