Analysis Of Macroeconomic Data Of Italy(2015-2017)

Introduction

Italy, which is also known as Italian republic, is one of the most famous among tourists county in Europe which is located by the Mediterranean Sea. Italy shares boarders with Switzerland, France, San Marino, Austria, Vatican City and Slovenia. The population of Italy is around 60 million inhabitants which means that it is one of the most populous European Union (EU) member state. The capital of Italy is Rome and the official EU language is Italian. Italy is EU member country since 1st of January 1958. Moreover, Italy is a parliamentary republic with a head of government which is known as the prime minister who is appointed by the president and a head of state- president. Italy is a country which is divided into 20 regions. Italy has got some main industries such as tourism, machinery, chemicals, food processing, ceramics, excels in clothing. Italy exports plenty of goods and services, the main once include clothing, chemicals, tobacco, transport equipment, high quality furniture and electrical equipment.

An important characteristic of an economy is the way in which economic activity is made up of different sectors, which are usually known as primary sector (production using natural resources), secondary sector (the production of manufactured goods), tertiary sector (the production of the service sector) and quaternary sector (the production based on information technology and information products). Italian economy consists of main sectors, such as industry sector, manufacture sector, tourism sector, agricultural sector and trade sector. Industry sectors are run by large corporations, medium-size corporations and small family run industry. All the small and medium-size industries in Italy play a major role in the development of the country economy. The sector employs approximately 30% of the local workforce and accounts 75% of the total Gross Domestic Product (GDP). In contrast, tourism sector is one of the leading sectors in the country. It receives many tourists from the across the globe and the sector has managed to create employment opportunity for many of the country citizens and foreigners as well. The most visited cities of Italy include Pisa, Venice, Rome, Florence, Milan. The sector accounts 11,8% of the country’s total GDP.

Gross Domestic Product (GDP)

GDP is the market value of the final goods and services produced in the economy during a given period. On the one side of the coin, it measures can provide an indicator of the quantity of resources available to citizens of the country in a given period, however on the other side of the spectrum, in the assessment of standard of living it has some drawbacks. The bar chart above depicts the data about GDP in Italy between 2015-2018 years. It can be clearly seen the lowest point on the chart is 0. 1% in July 2016 however it then dramatically accelerates to 0. 5% in January 2017. The result of the substantial growth may be due to the healthy investment growth and a robust external sector in 2017. The investment was in transport equipment, construction, machinery, armaments and plants. In addition to the investment, another reason for the Italy GDP growth is an expansion in the household consumption. According to the National Institute of Statistics (ISTAT), consumption expenditure increased by 2. 5% in 2017 in comparison with the year before. In 2017 Italian families experienced the slight growth in gross disposable income by 1. 7% and propensity to save decelerated substantially from 0. 7 points to 7. 8%. The average monthly household consumption expenditure was 2,564 euros.

Demographics

The bar chart below represents the total population of Italy in the period between 2008 and 2018 years. Overall, the population is growing over the years. From 2008 and 2012 the population was increasing steadily but not dramatically. However, in the period between 2012 and 2014 years the numbers of habitants have increased substantially from 59. 69 to 60. 78. From 2015 up until 2018 there is a slight drop from 60. 80 to 60. 48.

According to National Demographic Balance, in 2017 Italy had 60,483,973 inhabitants (where more than 5 million had foreign citizenship) of people which represents the decrease of 105,473 people compared to 2016. Nowadays, Italy is experiencing a decline in the total population, the death rate is significantly exceeding the birth rate. Statistics show there are 1,673 deaths per day in comparison with 1,353 births per day. Net migration is still happening, 289 per day, however, the overall trend is negative. Meanwhile, Italy is rapidly aging country. In the end of 2014 and in the beginning of 2015 a full 22% of its population was 65 and over with 13,5 under the age of 15. The GDP per capita (meaning the average level of GDP per head of population) was recorded with 34877. 83 US dollars in 2017. The latest records represent the GDP per capita in Italy is equivalent to 276% of the World’s average. According to the data, GDP per capita (in Euro) increased from 26,682 to 28,326 in the period between 2014 and 2017. UnemploymentUnemployment means the percentage of people who are economically active but for some reason cannot find a work placement. For any country it is difficult to achieve all the key macroeconomic objectives at the same time such as: sustainable and balanced economic growth, falling unemployment and rising employment rate, equilibrium on a country’s external balance of payments and price stability in other words inflation which should be 2%, considered as the target inflation percentage. In the economy there are some types of unemployment such as: cyclical, frictional, involuntary, regional, seasonal, structural and voluntary.

The graph above shows data about unemployment rate in Italy in the period between July 2013 and January 2018. The unemployment rate reached its peak such as 13% in January 2015. Since then the overall unemployment trend is decreasing steadily from 13% to almost 11%. However, the percentage climbs to 11. 3% in July 2017. People without a work placement increased by 61 thousand from the months before and employment expanded up to 59 thousand. Youth unemployment is the number of youngsters normally in the group of age between 15 to 24 years expressed as a percentage of the total youth labor force. According to statistics Italy is the country with one of the highest rates of youth unemployment among the 35-member countries of the Organization of Economic Co-Operation and Development (OECD). The following graph represents the trend of the youth unemployment rate in 2015-2017 years. At first glance, the trend is decreasing substantially from 43% up to 35%.

Looking more precisely, according to European Union (EU) statistics, 10. 6% of all youth Italian population was unemployed in 2015. The levels might be low due to the fact the data includes active and inactive youth with those who are still students and those who are not seeking for the job. Moreover, apart from the total unemployment rate Italian youth unemployment rate experiences the high rates of underemployment. The number of those who worked full-time, such as 30 hours per week, significantly decreased from 1,597,000 to 676,000 from 2000 to 2015 years. At the same time, the number of 15-24-year-olds who worked part-time slightly boosted from 172,000 to 237,000 persons. In addition, 83. 7% of those who worked part-time did it in involuntary basis in 2015 due to the lack of full-time work placement. Recently, the youth unemployment rate has increased in Italy leading to some possible consequences for the country. The high unemployment level stimulates the Italian youngsters to leave the country. The phenomenon is known as a brain drain. The possible reason behind that is youths emigrate for the further job opportunities abroad. Therefore, this significantly reflects on the Italian government as the investment in education and the youth labor force have significantly decreased. On the one side of the spectrum, this might potentially lead to the decrease in the economic growth of Italy. Minimum wage in ItalyMinimum wage is a system designed to protect the low paid by setting a minimum wage rate that employers are permitted to offer workers.

The diagram of a minimum wage is shown below to illustrate how it works. Wage rate SupplyWminDiagram shows the labour market for hospital cleaners. Employers demand workforce according to the wage rate. On the supply side, more employees may offer themselves for work when the wage rate is relatively high. If the market is unregulated, it may reach equilibrium with a wage rate W* and L*. W* Demand Ld L* Ls Quantity of labour Assuming the government came to the view W* is not sufficiently high to provide a reasonable wage for hospital cleaning staff. One solution might be is to impose a minimum wage, below which the employers are not allowed to offer work placement, Wmin. Consequently, it might lead to some effects on the market. Some employees, who are still employed, are better off and receive a good wage.

On the contrast, those who are unemployed are worse off. According to assumption, it is not clear whether the effect of minimum wage may make society a better off. However, it is likely the imposition of minimum wage might increase employment. Minimum wage in Italy is the lowest amount a worker can be legally paid for the work fulfilled. Italy has no government-regulated minimum wage. Instead, the minimum wage rate is determined by collective bargaining agreements on a sector-by-sector basis. In addition, some sectors however have minimum salaries determined by unions. Most of this unions have a minimum wage approximately 7 euros (EUR) per hour. In addition, the average wage in Rome is around 1400 EUR per month. Considering Italian economy which experiences currently a low performance, this wage is relatively high.

However, the cost of living is relatively high in Rome. Inflation [image: Italy Inflation Rate]Inflation is the rate of change of the average price, for instance, the percentage annual rate of change of the Consumer Price Index (CPI). The following bar chart represents the inflation trend in Italy in 2015-2017 years. Overall, the trend is relatively unstable. Italy experienced deflation several times in January 2015 where the percentage exceeded -0. 5% and in June 2016 where the percentage varies between -0. 5 and 0. From the end 2016 and in the beginning of 2017 Italian inflation rate has increased significantly compared to the previous years where the rate did not reach 0. 5. According to the bar chart in spring 2017 Italian inflation rate almost reached the inflation rate target percentage which is 2%. There might be some causes of inflation. A rise in the general price level could come from the demand side, where an increase in Aggregate Demand (AD) leads to a rise in prices, especially if the economy is close to its full capacity. An increase in the price level emanating from the demand side is known as demand-pull inflation.

Moreover, inflation is almost referred to as cost-pull inflation as the increase in the overall level of prices is cost-driven. In addition, persistent inflation, may take place only when the money stock (the quantity of money in the economy) grows more rapidly than real output. [image: Italy Consumer Price Index (CPI)] The bar chart above depicts the data about the Italian inflation and deflation known as Consumer Price Index (CPI) in the period between 2015 and 2017 years. CPI provides a measurement of the level of prices in the economy for most household goods and services. Overall, the trend is relatively positive throughout the years with some downturn points. In January 2015 Italy had one of the lowest CPI rate compared with other years, the rate almost reach 99. 5 Index Points. However, from the January 2016 the Italian CPI started growing steadily up till July 2017. The highest Index Point was reached in August 2017 which is a peak point, 101. 5 index Points.

The difference in Index Points between the lowest and the highest points is quite significant, such as almost 2. 2 Index Points. CPI is known as extremely crucial indicator for any economy of the country. However, there are some potential disadvantages of using CPI. According to Bureau of Labour Statistics, producer of the CPI, the index does not factor in substation. When certain goods become slightly more expensive, many consumers find less expensive substitution to them. The CPI presents numbers assuming consumers continue to buy the same amount of significantly expensive goods. Moreover, the CPI has been criticized as not providing an accurate measure of prices goods or consumer buying habits for more rural areas. Also, the CPI does not provide separate reports according to different demographic groups. However, considered some potential limitations, the CPI is widely used. It provides the basis for annual cost living adjustments to Social Security payments and other government-funded programs.

Foreign trade in Italy

Italy is considered as the 7th largest export economy in the world. In 2016 Italy exported $449B. In comparison with the past 5 years, the overall rate of exports has decreased from $502B, so the difference from 2011 and 2016 is quite significant, $53B. The tree map export below represents information about the total exports made by Italy in 2016. The top exports of Italy are Packaged Medicaments, 4. 8% ($21. 8B), Cars $15. 4B, Vehicle Parts $12B, Refined Petroleum $10. 1B and Valves $7. 49B. There are some top export destinations of Italy, such as Germany $52. 6B, France $43. 7B, the Unites States $43. 7B, the United Kingdom $24B and Spain $20. 5B.

The following tree map import on the next page illustrates the total import in Italy in 2016. In 2016 Italy imported $397B and this brought the country to the 10th place of the largest importer country in the world. In comparison with the past 5 years, the overall rate of imports has decreased dramatically from $545B in 2011 to $397B in 2016, making the significant difference $148B. The top imports of Italy are Cars $27. 6B, Crude Petroleum $11. 3B, Packaged Medicaments $1. 02B, other Plastic Products $1. 61B. One of the most recent imports in Italy are led by Cars which represents 6. 94% of the total imports of Italy, followed by Crude Petroleum, which account for 4. 56%.

The following graph represents the trade balance of Italy. The highest point on the diagram is shown in July 2015 where the Italy Balance of Trade almost reached 8000EUR Million and the following month the country experienced the dramatic double drop, less than 2000 EUR Million. In 2017 Italian trade surplus fell to EUR 47B from a record high of EUR 50B in the previous years as imports grew up to 9% to EUR 401B, the highest level since 2011 and exports rose as a 7% of EUR 448B. As the evidence suggests, Italy is the 9th biggest economy. However, economic structure of Italy depends mainly on services and manufacturing.

According to a data, the services sector accounts for almost 3 quarter of total GDP and employs approximately 65% of the country’s total employed people. On the other hand, the service sector industry accounts for a quarter of Italy’s total production and employs around 30% of the total workforce. In addition, the county’s manufacturing sector produces high-quality goods and therefore plays an important role in the global market of luxury goods.