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Italian Trade Surplus Expands

James Boston
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www.finances.com
Italian Trade Surplus Expands

Italian Trade Balances are showing further signs of improvement this month, the Non-EU figure for May has just been released and has yielded a significant increase on April’s surplus. May’s €2.449Bn is an easy improvement on the revised €1.654Bn experienced the previous month and is a welcome trend in Italian international trade. A seasonally adjusted breakdown of this figure shows that exports increased 5.4% on the month while imports rose by just 4.8%.

The year on year trade data is not so promising, while this month €2.449Bn is an impressive figure it needs to be compared to the same month last year to discern a longer term trend. May 2013 provided a €2.934Bn surplus to Italy’s Non-EU trade balance record, compared with May 2014 this represents a 1.9% decrease in exports coupled with an increase in imports of 1.3%.

Further signs of positive economic activity were however presented earlier this morning in the form of the Wage Inflation figures for the month of May. Month on month this indicator has moved from 0% change in April to a slight positive 0.1% this month. The year on year number is now 1.3% compared to just 1.2% the previous month.

The Italian authorities are striving hard to introduce much need structural reforms into the world’s ninth largest economy. Not unlike many developed economies, labor market reforms in Italy are proving slow and difficult to implement. Wage inflation in this situation should make negotiations somewhat easier, the problem however arises when the structural reforms themselves create the wage inflation. Increasing wages due to a combination of economic activity and structural efficiencies are to be welcomed, but when wages increase as part of the bargaining process to push through structural reforms then unless these are very measured in nature they will lead to a loss of competitiveness.

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