Export dynamics strongly influenced by rising prices

Foreign trade data for the first nine months of 2022


Economy - published on 22 December 2022


https://www.trevisobellunosystem.com/tvsys/img/notizie/cameratrevisobelluno.jpg
Source: Press Office Presidency of the Chamber of Commerce of Treviso – Belluno | Dolomites

On a yearly basis, the raw increase in Treviso exports is +15.5%; Belluno exports are close to +20%. Lead EU markets and the United States.

Treviso, 21 December 2022 – The general picture. The data on Italy’s and the territories’ trade exchanges updated to 30 September 2022, released by Istat a few days ago, confirm
positive, albeit weakening, territorial dynamics. Exports and imports increase both in comparison with the previous quarter and with the first nine months of last year. Growth on an annual basis
remains very strong: between January and September, national exports increased overall by +21.2% and Veneto exports by +17.5%. Even more important variations are recorded for imports: +43.6%
nationally and +39.4% in Veneto. However, the basic datum is that the positive dynamics of interchange in the period is strongly conditioned by price increases widespread in almost all commodity
sectors.

With these variations conditioned by price increases, recourse to deflation procedures is a must. Istat, on the basis of chain-linked and seasonally adjusted values, estimates a real increase in
Italian exports that is half of the nominal increase.

At the regional level, the nominal growth can be weighed against the export dynamics in value and quantity. The export variation in value, on an annual basis, as already mentioned, is +17.5%, in
quantity it drops by -1.2%. To be clear: the drop in quantity should not automatically be understood in a negative sense, because – even in times of inflation – companies continually rethink the
product/service mix to support added value, and therefore competitiveness. Even more marked, inevitably, is the differential for imports: in value terms, Veneto’s imports grew by +39.4%, in
quantity by +4.7%. Therefore the inputs of the production system are growing, because the system has so far continued to function, but unfortunately these inputs cost more.

The product sectors of Veneto’s interchange are also widely affected by the price effect, but to varying degrees. Looking at the main export items, the greatest differences between dynamics in
value and in quantity are observed for: metals and metal products, wood and paper, chemical products, products of other manufacturing activities (aggregate that includes furniture, eyewear
and jewellery), means of transport, rubber products, plastic and other non-metallic minerals. Machinery, the first item of Veneto exports, recorded below-average growth in value
against substantial stability in quantity (here company strategies aimed at limiting price increases in order not to lose market share to the main competitors probably come into play). Growth both
in value and (to a more modest extent) in quantity was recorded in the food and beverages and computer and electronic products sectors.

Looking at the main import items, the greatest increase in value of imports is observed for natural gas, which represents almost all the products from mines and quarries imported into Veneto, an
aggregate that registers +327% in value against a growth in quantity of +17.2%. Other items where the differential between changes in values and quantities is high include: metals and metal
products, wood and paper, and agri-food products.

The trade interchange of the province of Treviso

Having made it clear in the introduction that the positive export dynamic in the period under review is strongly influenced by price rises, with this tare we go on to consider the detailed data on
Treviso exports.

In the first nine months of 2022, exports from Treviso reached Euro 12.2 billion, an increase of +15.5% on an annual basis, more sustained towards EU27 markets (+18.1%), thanks in particular
to sales towards Germany and France. Towards the non-EU27 markets, the average increase of +11.6% is the result of opposite trends: very positive towards the USA (+19.2%), third outlet
market of “Made in Treviso” with a weight of 8.3% on the total provincial export; negative, as to be expected, towards Russia (-20.4%), but also towards China and Hong Kong (-4.4%). Compared to
2021, Treviso’s exports to the United Kingdom are recovering (+8.7%), which, however, is still unable to recover the levels of pre-Brexit sales (-9.2% compared to the results achieved in the first
nine months of 2019).

The import dynamic is even more affected by the inflation spiral: the year-on-year change is around +36%, with no significant differences between intra-EU and extra-EU imports. Departing
from the average are imports from the Netherlands (+88.6%, a variation linked in particular to the electronics and electrical components sector) and imports from Turkey (+67.5%, textiles
and clothing, fertilisers and metallurgy the items most affected by the increase). This is probably influenced by the search for alternative supply trajectories and diversification in the
purchase of raw materials and semi-finished products: perhaps as an alternative to China, which is still proceeding at a halt between one lockdown and another, or because they are no longer
available in the area affected by the Russian-Ukrainian conflict.

An analysis by sector of Treviso exports leads us to highlight the following aspects in particular:

Machinery, furniture and household appliances, the top three items in provincial exports, grew at a slower pace than the average for the province; the +10.9% variation in machinery turned
into a stalemate in sales to non-EU markets, with the sole exceptions of the USA (+23.3%) and Australia (+38.8%); sales in the EU27 held up well (+21.2%), while sales of household appliances were
the opposite: stalled sales in the EU27; +7.8% in non-EU markets, especially in the US (+59.5%), Australia (+52.1%) and Canada (+59.6%); furniture performance remains fairly similar between EU
(+13.6%) and non-EU markets (+10.2%). The recovery towards the United Kingdom was excellent (+22.2% year-on-year, but also +7.5% compared to pre-pandemic values). A negative sign appeared in
exports to the USA (-3.8%).

Far above average were the export increases in sectors strongly affected by raw material price rises such as metallurgy (+29.1%), chemicals (same
change) and paper and printing (+42%). But beverages (hence Prosecco) also saw exports grow by +28.1% year-on-year, particularly in EU markets (+37.5%) and especially in France
(+62.4%).

In line with the provincial average increase are the sectors linked to the fashion system: textiles, clothing and footwear. Exports of textile-clothing
products grew the most towards non-EU markets (+20.9%), even towards Russia (+18.7% from Euro 25.0 to 29.7 million). The year-on-year increase in imports of textile and clothing products is +41.4%,
with peaks of +89.5% from Turkey (from 39.5 to 74.8 million) and +107% from Egypt (from 11 to 23 million).

The trade interchange of the province of Belluno

The rise in prices is widespread, affecting all territories and most sectors and, consequently, also the positive dynamics of trade in the Belluno area. With the same tare on the price component,
we move on to analyse exports from Belluno which, in the first nine months of 2022, exceeded Euro 3.7 billion, with a year-on-year increase of +19.6%.

Growth for the non-EU27 area, to which 54% of exports from Belluno are directed, is +22.3%. More sustained was the dynamics towards the USA (+24.9%), the first reference market with 25% of
provincial exports realised. The export dynamic towards Turkey and Mexico (over +50% for both countries) and the Arab Emirates (+33.6%) was also lively, with increases higher than the extra-EU27
average variation. Sales to the United Kingdom were also positive (+6.9% year-on-year), a result that brings this market almost back to pre-covid levels (-2.7% compared to January-September 2019).
Direct exports to China and Hong Kong also increased (+19.6% compared to the first nine months of 2021), but the comparison with January-September 2019 is still negative (-13.6%).

Within the European Union, exports grew by +16.6% in one year, an increase distributed among all the main trading partners, in particular: France (+17.1%), Germany (+17.6%) and Spain (+24%).

The dynamics of exports from Belluno are driven by the eyewear sector, which grew by +24.7% year-on-year. The sector, with almost Euro 2.7 billion, of which Euro 1.7 billion realised in non-EU27
markets, represents more than 72% of total provincial exports. The United States remains the main trading partner: one third of the industry’s sales (almost €900 million) is destined for this
market (+26.1% compared to the first nine months of 2021).

Excluding the eyewear sector, the trend increase was +7.9%: the result of different sector dynamics, which can be summarised as follows:

Sustained growth for commodity-related products, paper (+43.3%), metallurgy (+27%), chemicals (+20.8%), and electronics and precision
equipment products (+17.2%, average change incorporating significant increases in exports to major trading partners both intra-EU27, Spain, France and Germany, and extra-EU27, Turkey, US, UK
and Russia).

Modest growth for textiles and clothing (which, after the strong acceleration experienced in 2021, recorded a year-on-year increase of +6%) and for
machinery (+4%). The latter, with more than 370 million euro in foreign sales in the first nine months of 2022, represent the second largest export item in the province. The average change
in machinery summarises a substantial stability for exports to the EU27 area (+0.6%, but with France, first trading partner, down by -8.4% on an annual basis and Germany, second trading partner,
stable compared to last year) and an increase of +12.7% in sales destined for the non-EU27 area, with significant increases towards the United Kingdom, which returned to pre-covid levels, and the
United States.

Rubber and plastic products, whose sales fell by -20.2% in one year, a contraction equally distributed between the EU27 (-19%) and non-EU27 area (-21.7%).

The wood industry deserves a separate mention, which confirms the trend reversal observed in the first half of the year: exports rose from EUR 5.2 million in January-September 2021 to EUR 8.5
million in the first nine months of 2022 (+53.5%), a level that is still far from the pre-Covid values (-55.8% compared to the same period in 2019).

Imports were even more markedly affected by inflationary dynamics: in the first nine months the increase was +37%, on a year-on-year basis, a variation that summarises +29.3% for purchases
from the EU27 area and +46.3% for those from outside the EU27 area. Particularly important were supplies from China and Hong-Kong (+54.5%), the first reference market for the province of Belluno
with over 382 million purchases made in the first nine months (almost 40% of total provincial imports).

The growth in imports is above the provincial average, especially for machinery (52%), metallurgy (+66.6%), tanning and leather processing (64.9%), products related to
electronics and precision equipment (49%), textiles and clothing (+52.5%) and wood (+69.4%). On the other hand, foreign purchases of eyewear-related products are in
line with the provincial average trend.

The comment of President Mario Pozza

“The data for the first nine months of 2022 confirm very strong export growth also for our provinces – commented the President of the Treviso-Belluno Chamber of Commerce, Mario
Pozza
– For Treviso it is +15.5% and for Belluno almost +20%.”

“But these positive dynamics incorporate the transfer of energy and raw material price increases onto final prices – the President recalls – and the fact that the high cost of energy is
weighing on our companies is undeniable: the recent Unioncamere survey on a sample of manufacturing companies in the Veneto region tells us that on average in one year, gas bills have doubled and
energy bills have more than doubled: this means that it costs more to produce.”

“I welcome – Pozza points out – the agreements in place and the energy-related projects on which convergence has been found, again within the European framework: the authorisation of
renewables, the solidarity and joint procurement package, and the market correction mechanism.”

“These measures go in the right direction, better late than never, that is to dampen speculation on price rises in order to give a breath of fresh air to our companies, which – the President
continued – have so far shown great resilience: two out of three companies, again of the Veneto manufacturing sample, have declared that they have kept their working regimes unchanged in order
not to lose market share or because they have not experienced a drop in orders, thus managing to absorb the higher costs incurred”.

“Going back to the export data for the first nine months of 2022 – the President concludes – I see that the markets of the European Union (+18-24% between Treviso and Belluno) and the
United States (+19-26%) are the main drivers. First indications, perhaps, on how the export trajectories are changing or will change, following the pandemic (sales in China and Hong Kong are still
negative for Treviso, both in comparison with last year and 2019, for Belluno the recovery is in the year but not on the pre-pandemic) and the Russia-Ukraine conflict. The same goes for the
supplies, to be studied if the supply chains are changing and which are the reference markets. These are all questions, which deserve to be explored in the coming months. We must create a network
and seize the opportunity of regional export structures such as Venicepromex and also the network of the 84 Italian Chambers of Commerce abroad with Assocamerestero. In my new role as President it
will be a primary objective to give small companies too, new goals for internationalisation”.

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