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Analysis-Skills shortage in southern Italy could stymie recovery drive

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Analysis-Skills shortage in southern Italy could stymie recovery drive
© Reuters. Men beg on the street in Naples, Italy, November 20, 2021. REUTERS/Ciro De Luca

2/5

By Crispian Balmer and Angelo Amante

BARI, Italy (Reuters) – Mayors in Italy’s poor south should be relishing the prospect of billions of euros from the European Union’s pandemic recovery fund, but a lack of project management expertise could mean they are unable to take full advantage of the scheme.

Italy hopes to receive 191.5 billion euros ($215.5 billion) in grants and loans from the 750-billion-euro kitty over five years, the largest beneficiary among the 27 EU states.

Focused on green transition, digitalisation, education and sustainable infrastructure, the recovery and resilience fund could help modernise the Italian economy via thousands of projects, especially in the less developed south.

“This represents a unique, extraordinary opportunity for us,” Antonio Decaro, mayor of Bari in Puglia, the heel of Italy’s boot, told a government roadshow promoting the scheme.

“But in order not to lose this chance, we need qualified people quickly to get these projects going.”

Other mayors said they also lacked staff qualified to draw up, manage and monitor projects they want to advance.

Leoluca Orlando, who runs Sicily’s main city Palermo, said he had just one technical manager authorised to sign off on EU project bids, while Gaetano Manfredi, the mayor of the biggest city in the south, Naples, said he had no technical managers.

“It is an absurd situation,” Orlando told Reuters.

The south accounts for just over 30% of Italy’s population and little more than 20% of national economic output, and the gap with the centre and north is growing. To help it catch up, it is due to receive 40% of Italy’s EU funds.

Years of budget austerity following the 2008 financial crisis have taken a particularly heavy toll on already indebted southern administrations, forcing them to slash staff.

According to a Bank of Italy study, the number of public sector workers in the south fell by 27.8% in 2008-2018 against a 18.5% drop in the north, which has traditionally had a better track record of managing its resources.

ACCELERATED DECLINE

The dearth of skilled personnel is already being felt.

Last month, all 31 proposals hurriedly put forward by Sicily for irrigation projects were rejected because they failed to meet the EU’s demanding criteria.

Antonino Scilla, who heads the agriculture department on the Mediterranean island, told Reuters stringent deadlines were partly to blame, but that a general lack of expertise was hurting his region.

“Sicily has gaps. It needs qualified personnel … We need a generational change. The average age of (state) employees here is 60, we need 30-year-olds, new graduates,” he said.

The Mezzogiorno, or “noon” as the south is called in Italian, has lagged the rest of the country for decades, but the divide has accelerated this century.

Gross domestic product per capita is some 40% lower in the south than in the centre-north, while unemployment stands at 16.7% compared with 6.1% in the north. Youth unemployment is 43.3% against 20.8%.

The government hopes the EU fund will lift Italy’s output by 3.6% by 2026, with sizeable advances expected in the south.

But Brussels has expressed concern about the region, whose track record of spending regular EU structural funds is poor.

“The role of local authorities in the implementation of the recovery plan is a potential weak point,” said Marco Buti, head of staff for EU economic affairs commissioner Paolo Gentiloni.

“If we look especially at the south of the country, there is a natural bottleneck,” he said during a visit to Italy this week, referring to the lack of experienced managers.

ATTRACTING TALENT

Bari currently has some 1,800 public sector workers, around 1,000 less than envisaged by the city staffing plan, while Manfredi said he thought Naples needed at least 1,000 more employees to take full advantage of the EU funds on offer.

“We know that skills are scarce,” Innovation Minister Vittorio Colao told dignitaries and businessmen at the government roadshow, held in a packed Bari theatre.

“As a ministry, we can give partial help, but it is impossible to think we can do everything. What I hope is that companies and local authorities pool their resources.”

Roberto Garofoli, in charge of implementing the national recovery plan, told the Bari audience that small teams would be dispatched by various state agencies to help manage projects.

The government has also pledged to hire 2,800 people in the south to work on programmes.

A first tender drew only 800 qualified applicants, however, with many professionals complaining that the short-term contracts paying some 1,500 euros a month were not appealing given the skills required.

The government is now revising the terms.

“The administrative machine is worn out and has lost expertise,” said Garofoli. “This is a problem we inherited not from the past government, but from decades of spending cuts. It is an enormous problem that you can’t resolve in a few months.”

($1 = 0.8884 euros)

Economic Indicators

U.S. manufacturing presses ahead; labor market gaining traction

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U.S. manufacturing presses ahead; labor market gaining traction
© Reuters. FILE PHOTO: A restaurant advertising jobs looks to attract workers in Oceanside, California, U.S., May 10, 2021. REUTERS/Mike Blake/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.

Signs that the economy was gathering momentum halfway through the fourth quarter were underscored by other data on Wednesday showing private employers maintained a strong pace of hiring last month. But there are fears that the Omicron variant of COVID-19 could hurt demand for services as well as keep the unemployed at home, and hold back job growth and the economy.

“Manufacturing should continue to contribute positively to GDP growth over the next year as businesses replenish inventories and supply-chain issues improve,” said Ryan Sweet, a senior economist at Moody’s (NYSE:) Analytics in West Chester, Pennsylvania. “There are risks, including the potential for businesses overbooking orders now and the Omicron variant magnifying price and supply chain issues.”

The Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October.

A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 61.0.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” said Timothy Fiore, ISM chair of the manufacturing business survey committee.

Global economies’ simultaneous recovery from the COVID-19 pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.

All of the six largest manufacturing industries, including computer and electronic products as well as transportation equipment, reported moderate to strong growth.

Makers of computer and electronic products said “international component shortages continue to cause delays in completing customer orders.” Transport equipment manufacturers reported “large volume drops due to chip shortage.” Furniture producers said “business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor.”

But there are some glimmers of hope. Prices for steel plate and hot-rolled coil appear to be nearing a plateau, according to manufacturers of fabricated metal products. Supply of plastic resins is improving, accounts from manufacturers of electrical equipment, appliances and components, as well as plastics and rubber products suggested.

The ISM survey’s measure of supplier deliveries slipped to a reading of 72.2 from 75.6 in October. A reading above 50% indicates slower deliveries.

The long delivery times kept inflation at the factory gate bubbling. The survey’s measure of prices paid by manufacturers fell to a still-high 82.4 from a reading of 85.7 in October.

Factories are easily passing the increased production costs to consumers and there are no signs yet of resistance.

Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that “the risk of higher inflation has increased,” adding that the U.S. central bank should consider accelerating the pace of winding down its large-scale bond purchases at its next policy meeting in two weeks.

The Fed’s preferred inflation measure surged by the most in nearly 31 years on an annual basis in October.

Stocks on Wall Street rebounded after Tuesday’s sell-off. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

Graphic: ISM PMI – https://graphics.reuters.com/USA-STOCKS/akvezozqbpr/ISM.png

STRONG ORDERS

The ISM survey’s forward-looking new orders sub-index climbed to a reading of 61.5 last month from 59.8 in October. Customer inventories remained depressed.

With demand robust, factories hired more workers. A measure of manufacturing employment rose to a seven-month high.

Strengthening labor market conditions were reinforced by the ADP National employment report on Wednesday showing private payrolls increased by 534,000 jobs in November after rising 570,000 in October. Economists had forecast private payrolls rising by 525,000 jobs.

Graphic: ADP – https://graphics.reuters.com/USA-STOCKS/byvrjqjlzve/adp.png

This, combined with consumers’ robust perceptions of the labor market last month suggest job growth accelerated further in November. First-time applications for unemployment benefits declined between mid-October and mid-November.

But a shortage of workers caused by the pandemic is hindering faster job growth. There were 10.4 million job openings at the end of September.

Workers have remained home even as companies have been boosting wages, school reopened for in-person learning and generous federal government-funded benefits ended.

“Overall, the risk remains that renewed health concerns will keep workers, especially those with caregiving responsibilities, from returning to the labor force, preventing a return to pre-pandemic strength,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

According to a Reuters survey of economists nonfarm payrolls probably increased by 550,000 jobs in November. The economy created 531,000 jobs in October.

The Labor Department is scheduled to publish its closely watched employment report for November on Friday.

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Economic Indicators

Mexican factories contract again as supply-side issues weigh, costs rise

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Mexican factories contract again as supply-side issues weigh, costs rise

MEXICO CITY (Reuters) – Mexico’s manufacturing sector remained little changed in November from October, shrinking for the 21st straight month as supply-side bottlenecks continued to weigh and input costs surged, a survey showed on Wednesday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index inched slightly higher to 49.4 in November from 49.3 in October, below the 50 threshold that separates growth from contraction.

The index has consistently remained below that threshold every month since March 2020 and plummeted to 35.0 in April 2020 amid the fallout from the coronavirus pandemic, in what was by far the lowest reading in the survey’s 10-1/2 year history.

The new reading signaled a further deterioration in the health of the manufacturing sector, though the contraction was mild compared to those seen since the onset of COVID-19, the survey said.

“The performance of Mexican manufacturers was again negatively impacted by supply chain constraints, although subdued demand conditions partly contributed to the latest contraction in output,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Data last week showed that Mexico’s economy contracted 0.4% https://www.reuters.com/markets/us/mexican-economy-shrinks-more-than-expected-third-quarter-2021-11-25 in the third quarter, receding faster than previously thought as services slumped and supply chain issues bit, challenging the central bank as it juggles record inflation, a weak peso and leadership changes.

“In some instances, companies indicated having purchased fewer inputs due to elevated prices for many items, exacerbating their stock-replenishing problems arising from lengthening delivery times,” said De Lima.

According to De Lima the survey underscored that inflationary pressures remained elevated, with the latest increase in input costs the second-strongest in over three years.

Mexican annual inflation accelerated faster than expected in the first half of November to more than 7%, the highest rate in over 20 years.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economic Indicators

Italy may shift 2 billion euros from tax cuts to energy price curbs – sources

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Italy may shift 2 billion euros from tax cuts to energy price curbs - sources
© Reuters. FILE PHOTO: Italy’s Prime Minister Mario Draghi looks on during a news conference after signing an accord with French President Emmanuel Macron to try to tilt the balance of power in Europe, at Villa Madama in Rome, Italy, November 26, 2021. REUTERS/Remo

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) -Italy is considering increasing by some 2 billion euros ($2.27 billion) funds set aside to curb energy prices next year, using resources previously planned to cut income and business taxes, three government sources said.

With international energy prices soaring, Mario Draghi’s government has already spent more than 4 billion euros this year to try to rein in utility bills by compensating companies that agree to cap their tariffs.

Draghi set aside a further 2 billion euros for next year in the 2022 budget approved by cabinet in October, but with energy cost pressures continuing to drive consumer price inflation, the government is now considering doubling that sum.

The money can be found because the government will use less than the 8 billion euros earmarked in the budget to cut income and business taxes, the sources said, asking not to be named because of the sensitivity of the matter.

With the Treasury aiming to trim the budget deficit to 5.6% of gross domestic product in 2022 from the 9.4% targeted this year, resources are limited.

The cabinet is likely to discuss the matter on Friday, one of the sources said.

The tax cut will focus mainly on income tax (IRPEF), reducing the number of tax rates to four from five, with the largest benefit going to middle-income tax-payers earning between 28,000 and 55,000 euros per year.

According to a preliminary deal reached among the ruling parties, the first tax band on annual income between 8,000 and 15,000 euros will be left at 23%. The second band, between 15,000 and 28,000 euros, will be lowered to 25% from 27%.

The third band, on income from 28,000 to 55,000 euros will get a more substantial cut to 35% from 38%.

The fourth band, on income from 55,000 to 75,000 euros will rise from 41% to 43%. This is the rate that is currently applied on income above 75,000 euros, effectively cancelling the fifth income tax band.

Draghi has been meeting delegations this week from parties in his national unity coalition to hammer out the details of the tax reform.

($1 = 0.8828 euros)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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