Global economy report : November-December 2015

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Global Economy Report

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Global Economy Report

The Global Economy Report is prepared in cooperation by the Macroeconomic Research Division of Banca Aletti and the Global Governance Programme of the Robert Schuman Centre for Advanced Studies of the European University Institute.

The objective of the Report is to provide an analysis of the current and expected macroeconomic and financial conditions at the global level, with also a focus on key economic areas such as Europe, the USA and ASIA.

This report has been prepared by:

- Daniele Limonta ([email protected])

- Massimiliano Marcellino ([email protected]) - Alessandro Stanzini ([email protected]) - Maria Eleonora Traverso ([email protected]) with the collaboration of:

- Alberta Martino ([email protected])

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EXECUTIVE SUMMARY



In the October report, the IMF trimmed its growth estimates. The

global GDP growth rate was cut by two tenths at 3.1% in 2015 and at

3.6% in 2016.



Developed economies should grow by 2.0% this year and by 2.2% the

next; emerging economies by 4.0% and by 4.5% respectively.



The decrease in growth intensity this year compared to 2014 (from

3.4% to 3.1%) is due to slower acceleration in growth in some OECD

countries in the first semester (USA, UK, Canada and Japan), coupled

with a stronger slowdown in China and deeper recession in Russia and

Brazil, with widespread negative effects in all emerging markets.



Acceleration in 2016 will take place thanks to stronger growth in major

economies, but slowdown in China and recession in Brazil and Russia will

persist.

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EXECUTIVE SUMMARY



Among developed economies, the high level of debt and the attempt to

reduce it are among the main causes of weak growth, a phenomenon

that is public as well as private.



In Europe, this phenomenon adds on to weaknesses due to

government debt crisis and credit crunch.



Debt, deleveraging and the recurring uncertainty phases, together with

past issues, cause very weak capital investment spending. Export is

recovering but negatively influenced by low growth in Asia and continuing

crisis with Russia. Private consumption appears instead steady.

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EXECUTIVE SUMMARY



In China, the principal macroeconomic variables are now on sensibly

lower trajectories, also compared to the recent past.



The stock sboom, a declining cycle beyond expectations due to the

change of development model, macroeconomic imbalances, some doubt

on the capacity of economic policy to limit the weakness and, finally, the

decision to devalue the yuan in three stages (11-12-13 August), have

given way to a very intense currency contagion and an exceptional

increase in risk aversion, causing new drops in raw materials’ prices, with

an intensification in deflationary impulses in a strong and rapid vicious

circle.

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EXECUTIVE SUMMARY



The risk of systemic contagion with a short circuit between finance and

real economy is still present, although not quite clear cut.



The Fed’s monetary policy decisions are thus very important. Now the

normalisation phase of American monetary policy seems very close. While

its effects on the real economy will be likely minor, those on the financial

markets could still be major.



The ECB seems instead at least partly unsatisfied by its quantitative

easing, so that it plans another action in December, although the most

recent data on core inflation seem slightly better.



In this report we present a special focus on the Euro area and its major

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Fonte: Thomson Reuters Datastream 2008 2009 2010 2011 2012 2013 2014 2015 90 95 100 105 110 115 US 110,1 EUROZONE 99,5 UK 106,4 JAPAN 99,8

Fonte: Thomson Reuters Datastream

2011 2012 2013 2014 2015 -0,6 -0,4 -0,2 0,0 0,2 0,4 0,6 0,8 1,0 -2 -1 0 1 2 3 1Q % 0,3% 1Y % 1,6% - dx GDP DYNAMICS

In the third quarter 2015, aggregate income grew by 0.3% compared to previous period, growing for the tenth quarter in a row. On a year on year basis, the increase was at 1.6%, highest since 2011. Recovery’s intensity is still largely inferior to Anglosaxon economies and also compared to Japan’s.

GROWTH DATA Q3-15

GDP COMPARISON Adjusted values, 2008=100

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Fonte: Thomson Reuters Datastream 2013 2014 2015 -3 -2 -1 0 1 2 3 4 Germany 1,7% France 1,2% Italy 0,9% Spain 3,4%

2013 2014 2015 -1,0 -0,5 0,0 0,5 1,0 Germany 0,3% France 0,3% Italy 0,2% Spain 0,8% QoQ CHANGES

GDP growth has occurred simultaneously in the major economies of the Union. In Germany income grew by 0.3%, as in France; in Italy growth was at +0.2%, in positive territory for the third consecutive quarter, though a bit smaller than expected. Spain confirmed its’ growth rates well above European average.

YoY CHANGES

GROWTH DATA Q3-15

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Fonte: Thomson Reuters Datastream 2013 2014 2015 -6 -4 -2 0 2 4 Netherlands 1,8% Portugal 1,4% Belgium 1,5% Austria 0,8%

2013 2014 2015 -2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 Netherlands 0,1% Portugal 0,0% Belgium 0,5% Austria 0,1% QoQ CHANGES

Among minor economies we observe moderate growth, but with different impulses. Portugal was stagnant, after five consecutive growth quarters, as well as Austria and The Netherlands.

YoY CHANGES

GROWTH DATA Q3-15

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Fonte: Thomson Reuters Datastream -1 0 1 2 3 4 SLOVAKIA 3,5 SPAIN 3,4 LATVIA 2,5 CYPRUS 2,2 ETHERLANDS 1,9 LITHUANIA 1,8 GERMANY 1,7 EUROZONE 1,6 PORTUGAL 1,4 BELGIUM 1,3 FRANCE 1,2 ITALY 0,9 AUSTRIA 0,8 ESTONIA 0,5 GREECE -0,4 FINLAND -0,7

Slovakia has been the most dynamic economy in the third quarter of 2015, followed by Spain, the only large economy in the leading pack. Three countries remain in the negative area.

GROWTH DATA Q3-15

YoY CHANGES

-0,5 0,0 0,5 1,0 1,5 SLOVAKIA 0,9 SPAIN 0,8 CYPRUS 0,5 LITHUANIA 0,5 LATVIA 0,4 EUROZONE 0,3 FRANCE 0,3 GERMANY 0,3 BELGIUM 0,2 ITALY 0,2 AUSTRIA 0,1 ETHERLANDS 0,1 PORTUGAL 0,0 ESTONIA -0,5 GREECE -0,5 FINLAND -0,6

GDP QoQ % Previous Quarter

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Fonte: Thomson Reuters Datastream 2008 2009 2010 2011 2012 2013 2014 2015 90 92 94 96 98 100 102 104 106 Germany 105,3 France 102,5 Italy 91,1 Spain 94,7

Among major economies, only Germany and France have caught up with pre-crisis income levels. Among minor economies, this condition exists for Netherlands, Belgium and Austria.

COMPARATIVE LEVELS

GROWTH DATA Q3-15

2008 2009 2010 2011 2012 2013 2014 2015 90 92 94 96 98 100 102 104 106 Netherlands 100,5 Portugal 93,6 Belgium 104,3 Austria 101,0 COMPARATIVE LEVELS

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At the beginning of the fourth quarter, the level of leading indicators confirms the expansive phase of the European economy. In October, composite PMI grew by three tenths at 53.9, confirming the aggregate cycle’s stability. The Sentix November index turned positive and interrupted its decline.

BUSINESS CYCLE BAROMETER

2012 2013 2014 2015 -40 -30 -20 -10 0 10 20 -0,4 -0,2 0,0 0,2 0,4 0,6 0,8 Sentix 15,1 - sx Eurocoin 0,4

2012 2013 2014 2015 42 44 46 48 50 52 54 56 PMI SERV 54,1 PMI COMPOSITE 53,9 PMI NEW ORDERS 53,6 PMI MANUF 52,3

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-4 -3 -2 -1 0 1 2 -0,4 -0,2 0 0,2

The October ESI index fixes the economic cycle in full expansion area. Leading indicators signal the continuation of the recovery phase for the fourth quarter, with a growth intensity similar to the previous quarters.

ESI INDEX

slowdown expansion

recession recovery

OCT-15

GDP FORECAST

BUSINESS CYCLE BAROMETER

-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2

IV I II III IV I II III IV I II III IV I II III IV I II III IV 2010 2011 2012 2013 2014 2015

FORECAST EM GDP

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apr 2015 mag 2015 giu 2015 lug 2015 ago 2015 set 2015 -2 -1 0 1 2 3 4 -0,1 0,0 0,1 0,2 0,3 0,4 0,5 0,6 EUROZONE (RH Scale) -0,1% GERMANY 0,0% FRANCE -0,4% ITALY 0,2% SPAIN 0,5%

mag 2014 giu 2014 lug 2014 ago 2014 set 2014 ott 2014 nov 2014 dic 2014 gen 2015 feb 2015 mar 2015 apr 2015 mag 2015 giu 2015 lug 2015 ago 2015 set 2015 ott 2015

-1,0 -0,5 0,0 0,5 1,0 0 1 2 3 4 5 6

MoM -0,1% 3mav ann. 2,5% YoY 2,9%

RETAIL SALES

After a vigorous increase in July and a basic stagnation in August, Eurozone’s aggregate retail sales have registered a modest decrease in September, by one tenth of a point compared to the previous month.

QoQ CHANGES

Largest countries

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Fonte: Thomson Reuters Datastream 2011 2012 2013 2014 2015 -14 -12 -10 -8 -6 -4 -2 0 2 4 Euro Area 2,7% Germany 3,3% France 3,6% Italy 2,5% Spain 3,8%

On an annual basis we foresee an acceleration in retail sales’ trajectories in all of Eurozone’s major economies, with increases above 2%.

COMPARATIVE LEVELS QoQ CHANGES

Major countries, qoq changes (3-month averages)

CONSUMER SENTIMENT

VENDITE AL DETTAGLIO YOY

06 07 08 09 10 11 12 13 14 15 -35 -30 -25 -20 -15 -10 -5 0 -8 -6 -4 -2 0 2 4 Consumer sentiment -7,7 Retail sales y/y 2,9%

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Fonte: Thomson Reuters Datastream 2010 2011 2012 2013 2014 2015 2016 -10 -5 0 5 10 44 46 48 50 52 54 56 58 60

n d g f m a m g l a s o n 2014 2015 -0,5 0,0 0,5 1,0 1,5 -0,5 0,0 0,5 1,0 1,5 2,0 2,5

Industrial production has shown some uncertainty recently, but the leading indicator’s evolution in expansive territory suggests the growth phase will continue in coming months

Eurozone ; Monthly Changes

PMI MANUFACTURING Lag 3m Industrial Production Yearly change month/month YoY, dx

PRODUCTION

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Fonte: Thomson Reuters Datastream 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 40 42 44 46 48 50 52 54 56 -4000 -3000 -2000 -1000 0 1000 2000 3000

PMI Employment +3m 51,96 Employment (y/y) 1279,46

2009 2010 2011 2012 2013 2014 2015 -400 -200 0 200 400 600 800 8 9 10 11 12 13 Unemployed (thousands) -131 Unemployment Rate 10,80%

The labour market’s trend of continuous improvement has carried on during the summer months of 2015. The leading indicator is again in expansive territory in October, supporting the gradual improvement of employment conditions.

Unemployment

LABOUR MARKET

Employment and expectations

LABOUR MARKET

LABOUR MARKET

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Fonte: Thomson Reuters Datastream 07 08 09 10 11 12 13 14 15 -1 0 1 2 3 4 5 -1 0 1 2 3 4 5 Official Rate 0,05% CPI 0,1% CPI core 1,1%

INFLATION

Yearly change

INFLATION AND POLICY RATE

The October data indicated an upwards correction in inflation by one tenth, up to 0.1%, after the negative figure in September. The core index also grew by one tenth, at +1.1%. Producer prices (-3.1%, constantly negative since August 2013) keep inflation risks well under control.

06 07 08 09 10 11 12 13 14 15 16 -10 -5 0 5 10 40 45 50 55 60 65 70 PPI Yearly change

PMI INPUT PRICES

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -10 -5 0 5 10 35 40 45 50 55 60 PPI Yearly change PMI OUTPUT PRICES

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Fonte: Thomson Reuters Datastream 06 08 10 12 14 1,0 1,5 2,0 2,5 3,0 1,3 1,3

INFLATION

Yearly change INFLATION BY MACROSECTOR Variazioni tendenziali

-10 -8 -6 -4 -2 0 2 4 ALCOHOL TOB 1,6 SERVICES 1,3 CORE 1,1 N. IND. GOODS 0,6 ALL ITEMS 0,1 ENERGY -8,5 HICP YoY % 10 year average 5 year average

06 08 10 12 14 -15 -10 -5 0 5 10 15 20 -8,5 -8,5

06 08 10 12 14 -2 0 2 4 6 8 1,6 1,6

06 08 10 12 14 -0,5 0,0 0,5 1,0 1,5 0,6 0,6 FOOD SERVICES ENERGY INDUSTRIAL GOODS

The October data indicated an increase in sectorial inflation, specifically in food, industrial goods (excluding energy) and services, that justify the increase in the core component. On the contrary, energy prices further increased their drop.

Weight 19.3% Weight 10.9%

Weight 27.3%

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INFLATION

Changes

INFLATION BY SECTOR

Changes

INFLATION BY SECTOR

-10 -8 -6 -4 -2 0 2 4

ALCOHOL TOB 2,0 REST & HOTELS 2,0 EDUCATION 1,6

FOOD 1,6 INSURANCE 1,5

CORE 1,1 ATION & CULT. 0,9

HEALTH 0,7 THING & FOOT. 0,5

ING & HH EQ. 0,5 ALL ITEMS 0,1 LASH ESTIMATE 0,0 MUNICATIONS -0,1 HOUSING -1,0 TRANSPORT -3,2 ENERGY -8,5 HICP YoY % 10 year average 5 year average

-0,5 0,0 0,5 1,0 1,5 2,0 EX ENERGY 1,2

CORE 1,1 UNPROC. FOOD 1,0

EN & SEAS FOOD 0,9 FREQUENT PURCH 0,3 ALL ITEMS 0,1 EX TOBACCO 0,0 FLASH ESTIMATE 0,0 EX ADM. PRICES 0,0 EX SEAS FOOD -0,1 HICP YoY % 10 year average 5 year average

Net of the energy component, Eurozone’s inflation would be decidedly higher, at 1.2% in October.

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Fonte: Thomson Reuters Datastream 2013 2014 2015 2016 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0 2,5

CPI HEADLINE - historical data 0,1% Forecast

CPI CORE - historical data 1,1% Forecast

INFLATION

Yearly change

In the last quarter of the year strong base effects connected to energy prices will tend to push inflation on the rise. The average rate is null in 2015 and should reach +1.1% in 2016 for the headline index; 0.8% and 0.9% for core.

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Fonte: Thomson Reuters Datastream 0,4% -4,5% 2,0% 1,6% -0,9% -0,5% 0,9% 1,5% _1,4% 08 09 10 11 12 13 14 15 16 -4 0 -4 0

EUROZONE – Quarterly RatesGDP EUROZONE – Yearly Average Rates

GDP

2013 2014 2015 2016 -0,4 -0,2 0,0 0,2 0,4 0,6 GDP QOQ Forecast Forecasts

GROWTH FORECASTS

We confirm a constant and moderate growth in Eurozone GDP, though assuming a temporary slowdown in the last quarter of 2015 due to Germany’s weakness. Growth forecast for the current year is at +1.5%, while for 2016 it is at +1.4%.

0.9 1.5 1.4

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6,9% 2,0% 1,9% 0,1% 7,7% 10,4% 11,4% 5,8% 5,0% 0,1% 4,0%

nov-14 dic-14 _gen-15 feb-15 mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15 set-15 -5 0 5 10 15 -4 -3 -2 -1 0 1 2 3 4

2011 2012 2013 2014 2015 -5 0 5 10 15 20 25 40 45 50 55 60 Export 4,3 PMI Export 51,9, dx Export 6mm 7,3

7,0% 4,3% 4,9% 6,5% 6,8% 11,5% 12,7% 13,6% 12,0% 0,9% -2,4%

nov-14 dic-14 gen-15 feb-15 _mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15 set-15

-10 -5 0 5 10 15

-1,6% 2,8% -0,8% 1,3% 0,9% 1,7% 1,6% -1,1% 2,3% -5,2% 2,6%

nov-14 dic-14 gen-15 feb-15 mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15 set-15

-6 -4 -2 0 2 4 EXPORT

Germany’s exports registered a modest growth in September (+2.8%), but the three month averages point toward a slowdown in the expansive impulse of foreign trade and the trend rate is at 2015 lows. var. % m/m

GERMANY:

FOREIGN TRADE

EXPORT var. % 3m/m EXPORT

var. % a/a IMPORTvar. % a/a

IMPORT m/m, dx

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Fonte: Thomson Reuters Datastream 0,1% 1,0 -0,3% 0,2% -0,5% 0,6% 0,4% -0,6% 0,9% -0,8% -1,2%

nov-14 dic-14 _gen-15 feb-15 _mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15

-1,5 -1,0 -0,5 0,0 0,5 1,0 -10 -5 0 5 10 Energy 5,2 Cons Durable 0,9 Constructions 0,8 TOTAL 0,2 x Constructions 0,1 mediate Goods -0,1 Manufacturing -0,4 Capital Goods -0,4 Consumer Goods -1,1 ns non Durable -1,5 Var % YoY 3 Year Min 3 Year Max

2011 2012 2013 2014 2015 -5 0 5 10 15

Ind. Prod. YoY 0,1 average 2,4

PRODUCTION

Following a double decrease in August and September, the trend growth rate of German industrial production is almost zero, indicating an output stagnation. The weakness in three month average signals an evident loss in economic activity momentum…

Total ex-building; var. % m/m

GERMANY:

INDUSTRIAL ACTIVITY

2,1% 3,6% 6,0% 4,2% 1,6% 1,0% 0,5% 1,7% 2,1% 0,6% -1,3%

nov 14 dic 14 _{gen 15} feb 15 mar 15 apr 15 _{mag 15} giu 15 lug 15 ago 15

-2 -1 0 1 2 3 4 5 6 PRODUCTION

Total ex-building var. % 3m/3m

PRODUCTION

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-10 -5 0 5 10 Domestic 3,2 onsumer Goods -0,3 mediate Goods -0,9 TOTAL -0,9 Capital Goods -1,1 From Aborad -3,8 Var % YoY 3 Year Min 3 Year Max

2011 2012 2013 2014 2015 -10 -5 0 5 10 15 20 25 40 45 50 55 60 65 Orders -0,9

PMI New Orders 53,8, dx Orders 6mm 2,1

2,8% 5,3% 5,0% 2,3% -5,9% -0,7% 3,4% 11,9% 7,8% 1,1% -11,3%

nov-14 dic-14 gen-15 feb-15 mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15 -10 -5 0 5 10 15

-2,3% 3,3% -2,6% -0,9% 1,0% 2,2% -0,4% 1,9% -2,2% -1,8% -1,7%

nov-14 dic-14 gen-15 feb-15 mar-15 apr-15 _mag-15 giu-15 lug-15 ago-15

-3 -2 -1 0 1 2 3 4 ORDERS

The triple contraction in new orders in Germany confirms the slowdown in industrial activity as suggested by production data. Qualitative surveys also confirm the persistence of an expansive base impulse in industry, highlighted by the ascending trajectory of PMI index, that thus qualifies the slowdown as temporary…

Manifacturing, mom % change Manifacturing, qoq % changeORDERS

ORDERS

Manifacturing, yoy % change Manifacturing, yoy % changeORDERS

GERMANY:

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Germany’s leading indicators’ trend is dichotomous. Those that reflect investors’ sentiment like ZEW, more sensible to the cycle’s short term fluctuations, have a downward trajectory for the impact of emerging markets’ slowdown and the VW scandal. On the other hand, those who reflect real economic activity significantly hold their stance. The IFO index remained stable in October, on the year’s highs, the PMI survey is also stable and confirms expansion’s persistence.

GERMANY:

BUSINESS CYCLE

2012 2013 2014 2015 42 44 46 48 50 52 54 56 58 PMI SER 54,5 PMI COMPOSITE 54,2 PMI NEW ORDERS 53,6

PMI MAN 52,1

2012 2013 2014 2015 90 95 100 105 110 115 120 -60 -40 -20 0 20 40 60 80 IFO 108,2

IFO Curr Cond 112,6 IFO Exp 103,8 ZEW (dx) 10,4

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-4 -3 -2 -1 0 1 2 -0,6 -0,4 -0,2 -1E-15 0,2 0,4

Leading indicators signal the risk of a temporary slowdown in the final quarter of the year. However, the October ESI index confirms the expansive base trajectory, positioning the cycle in the highest quadrant.

slowdown recession Since 2007 expansion recovery OCT-15

ESI INDEX GDP FORECAST

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0

IV I II III IV I II III IV I II III IV I II III IV I II III IV

2010 2011 2012 2013 2014 2015

FORECAST BD GDP

GERMANY:

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The level of the French economic cycle has improved. The October composite PMI index grew at 52.6 from 51.9 in September, at a five month high, thanks to stability in the Manufacturing component (50.6, highest since April 2014) and growth in Services (52.7 from 51.9, five month high). INSEE and Bank of France confidence surveys are on several years’ highs.

2012 2013 2014 2015 40 42 44 46 48 50 52 54 80 85 90 95 100 105 110 115

INSEE Bus Conf 102,7 PMI COMPOSITE 52,6 BdF Bus Sentiment 98,7

2012 2013 2014 2015 40 42 44 46 48 50 52 54 56 PMI MAN 50,6 PMI SER 52,7

PMI NEW ORDERS 51,9

LEADING INDICATORS LEADING INDICATORS

FRANCE:

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-3 -2,5 -2 -1,5 -1 -0,5 0 0,5 1 1,5 2 -0,4 -0,2 0 0,2

The ESI index has completed the passage from recovery to expansion area, entering the highest

quadrant, abandoned the last time in October 2011. The leading indicators confirm the

economy’s acceleration potential for the final part of the year. The terroristic attacks of 13 November are not expected to impact significantly on growth if consumers’ and firms’ confidence is quickly restored.

recession

slowdown expansion

recovery

Since 2007

OTT -15

ESI Index GDP FORECAST

-0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2

FORECAST FR GDP

FRANCE:

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Leading indicators signal decidedly a moderation in expansive intensity compared to past highs.

2012 2013 2014 2015 35 40 45 50 55 60 65 PMI SER 55,1 PMI COMPOSITE 54,6 PMI NEW ORDERS 53,7

PMI MAN 51,7

2012 2013 2014 2015 -50 -40 -30 -20 -10 0 10 -25 -20 -15 -10 -5 0

MEF Bus Conf 0,0 - dx MEF Cons Conf -2,6 BoS NEW ORDERS -5,0

SPAIN:

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-3 -2,5 -2 -1,5 -1 -0,5 0 0,5 1 1,5 -0,3 -0,2 -0,1 0 0,1 0,2

Accordingly, we forecast a gradual decrease in expansive intensity in Spain for the final part of 2015, though still positive and rather large.

Dal 2007

OTT-15

-1.0 -0.5 0.0 0.5 1.0 1.5

IV I II III IV I II III IV I II III IV I II III IV I II III IV

2010 2011 2012 2013 2014 2015 FORECAST ES GDP recession slowdown expansion recovery

SPAIN:

BUSINESS CYCLE

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All leading indicators give positive signals about the Italian economy. Households’ confidence, according to ISTAT, is at highest levels since 2002, business confidence is at highest since 2008, while October PMI are solidly above 50, signalling a vigorous growth of economic activity.

2012 2013 2014 2015 70 80 90 100 110 120

ISTAT Bus Conf 105,9 ISTA Hous Conf 116,9

ISTAT Economic Sentiment 107,5

2012 2013 2014 2015 35 40 45 50 55 60

PMI NEW ORDERS 54,2 PMI MAN 54,1

PMI COMPOSITE 53,9 PMI SER 53,4

ITALY:

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-2,5 -2 -1,5 -1 -0,5 0 0,5 1 1,5 -0,3 -0,2 -0,1 0 0,1 0,2 0,3

The ESI index is in the middle of the expansive quadrant, with a strong increasing trajectory. Qualitative indexes are consistent with an economic expansion close to half a percentage point in the fourth quarter of the year, though the lower than expected GDP value for Q3 suggests some caution. expansion slowdown recession recovery Dal 2007 OTT-15

-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6

FORECAST IT GDP

ITALY:

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Fonte: Thomson Reuters Datastream 2013 2014 2015 -8 -6 -4 -2 0 2 4 6 1,3 0,7 1,8 3,9

apr 15 mag 15 giu 15 lug 15 ago 15 set 15 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0

Germany -1,1% France 0,1% Italy 0,2% Spain 1,2%

Beyond Germany’s fall, industrial activity moderately grew in September in the other Eurozone major economies. Spain boasts the most vigorous growth in industrial activity, at almost 4% yearly, over twice as high as the other major economies.

Largest countries; qoq chnages

Principal countries; Changes tendenziali

France Italy Spain Germany

COUNTRY COMPARISON:

PRODUCTION

Yoy changes (3-month averages)

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Spain presents the highest unemployment rate (21.6%), twice as high as Eurozone’s average (10.8%); Germany has the lowest (6.4%). Only in 2015, the Italian unemployment rate started to decrease (11.8%), although higher than European average. In the current year, employment experiences a major boost also in Italy.

06 07 08 09 10 11 12 13 14 15 5 10 15 20 25 30 EUROZONE 10,8 GERMANY 6,4 ITALY 11,8 FRANCE 10,0 SPAIN 21,6 UNEMPLOYMENT

Annual rates, percentage values Tassi annui, valori percentualiEMPLOYMENT

06 07 08 09 10 11 12 13 14 15 -8 -6 -4 -2 0 2 4 6 _{EUROZONE 1,9} GERMANY 0,9 ITALY 0,9 FRANCE 0,2 SPAIN 3,1

COUNTRY COMPARISON:

LABOUR MARKET

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Fonte: Thomson Reuters Datastream 2011 2012 2013 2014 2015 -15 -10 -5 0 5 10 15 EUROZONE GERMANY FRANCE ITALY

Internal demand, supported by consumption, is still constricted by investments’ weakness, mainly due to high debt (an effect of the crisis…) and remaining uncertainty, while the credit conditions have improved substantially. The capex evolution is stagnant in France and Italy, only moderately positive elsewhere. Spain is also in this aspect the most dynamic economy.

INVESTMENT

Yearly rates, percentage values

SPAIN

COUNTRY COMPARISON:

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Fonte: Thomson Reuters Datastream 09 10 11 12 13 14 15 -2 -1 0 1 2 3 4 -0,7

09 10 11 12 13 14 15 -1 0 1 2 3 4 0,3

09 10 11 12 13 14 15 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 0,1

09 10 11 12 13 14 15 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0 2,5 0,3

October statistics signal a widespread improvement of inflation in the Monetary Union’s major economies. In Germany, the inflation rate passed from zero to +0.3%, a five month high. In Italy the NIC index, including tobacco, grew from +0.2% to +0.3%, registering the highest since June 2014; in Spain the index increased to -0.7% from -0.9%, the worst figure among major economies.

GERMANY FRANCE

ITALY SPAIN

COUNTRY COMPARISON:

INFLATION

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Fonte: Thomson Reuters Datastream -1,1% -5,5% 1,7% 0,6% -2,8% -1,7% -0,4% 0,7% 1,3% 08 09 10 11 12 13 14 15 16 -6 -4 -2 0 2 -6 -4 -2 0 2

1,1% -3,6% 0,0% -1,0% -2,6% -1,7% 1,4% 3,1% 2,7% 08 09 10 11 12 13 14 15 16 -4 0 4 -4 0 4

0,2% -2,9% 2,0% 2,1% 0,2% 0,7% 0,2% 1,1% 1,3% 08 09 10 11 12 13 14 15 16 0 0

1,1% -5,6% 4,1% 3,7% 0,4% 0,3% 1,6% 1,4% 1,5% 08 09 10 11 12 13 14 15 16 -4 0 4 -4 0 4

Nel 2016: Francia ed Italia +1.3%, Germania 1.5%, Spagna 2.7%.

GERMANY % change over year

FRANCE % change over year

ITALY

% change over year 1.6 1.4 1.5 0.2 1.1 1.3 -0.4 0.7 1.3 SPAIN % change over year

1,4 3.1 2.7

COUNTRY COMPARISON:

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DISCLAIMER

The content of the preceding pages has been prepared by Banca Aletti&C. S.p.A. (“Banca Aletti”) together with the European University Institute. Banca Aletti – belonging to the Gruppo Banco Popolare – is a broker authorized by law, listed in the Register of Banks, number 5383.

With this document Banca Aletti proposes to its customers’ evaluation information retrieved from reliable sources in the system of financial markets and – where deemed necessary – its own opinion on the matter with possible commentary (notes, observations, evaluations). We point out that the information provided, communicated in good faith and on the basis of data available at the moment, could be inexact, incomplete or not up to date and is apt to variation, even without notice, at any given moment.

This document cannot be in any way considered to be a sales or subscription or exchange offer, nor any form of soliciting sales, subscriptions or exchange of financial instruments or of investment in general and is neither a consulting in financial investment matters.

Banca Aletti is not responsible for the effects deriving from the use of this document. The information made available through the present document must not be considered as a recommendation or invitation on Banca Aletti’s side to accomplish a particular transaction or to perform a specific operation.

Each investor should form his own independent persuasion, based exclusively on his own evaluations on the opportunity to invest. The decision to undertake any form of financial operation is at the exclusive risk of the addressees of the present disclaimer.

The source of all data and graphs is provided by Thomson Reuters where not otherwise specified.