is still being blocked by weak demand expectations and uncertainty about future economic trends, geopolitical developments, and the consequences of the uk referendum. it is no longer demonstrable that credit availability poses a major obstacle to investment decisions ; business lending is not growing essentially as a result of weak demand. the differences across categories of firms are significant : trends in loans to firms with more than 20 employees and to those in services are positive, while in the construction sector they remain negative. interest rates on new business loans continue to fall and the differential with respect to the corresponding euro - area average has been all but wiped out. in the three months ending in august, lending to the non - financial private sector stagnated on a seasonally adjusted basis, while household lending continues to expand ( 1. 4 per cent on an annualized basis ) ; loans to non - financial corporations contracted by 1. 2 per cent. for new loans to firms the cost of borrowing has come down by around 25 basis points from the end of 2015. signs from the labour market are positive overall. in 2015, thanks in part to the social security contribution relief for open - ended hiring and the introduction of contracts with rising levels of protection, employment grew more rapidly than trends in output might have suggested. in 2016 employment continued to expand ; during the year there have been signs of a slowdown, possibly also in connection with the retrenchment of social security contribution relief. following the hiatus of the second quarter, gdp – on the basis of the information provided by the cyclical indicators – could start to increase again in the third, albeit at a very slow pace. in july industrial output rose by 0. 4 per cent, returning to the average levels recorded in the second quarter. in september business confidence was bolstered across all sectors of economic activity, also thanks to the more favorable assessments on order books. household confidence is still relatively robust, but below the levels recorded at the end of 2015. according to september ’ s survey on inflation and growth expectations, firms expect to increase investment expenditure overall in the second half of 2016. the macroeconomic outlook in the update of the economic and financial document is less favourable compared to that of april. according to the current legislation scenario, gdp in italy will increase by 0. 8 per cent this year ( as against 1. 2 per cent forecast in the spring ) and slow slightly in the next ( to 0. 6 per cent, compared with 1. 2 per cent ). the

nevertheless believe it could be an effective way for capital markets union to contribute to consistent pricing of risk across countries. for it will help ensure a homogeneous, but risk - consistent transmission of monetary policy decisions. 10. but capital markets union can deliver on more than just that. it can also greatly increase the efficacy of monetary policy. common to all monetary policy decisions is that their transmission to the real economy is sluggish and can sometimes be incomplete. for example, the extent to which banks are able to lower lending rates following a rate cut depends on many factors beyond the control of monetary policymakers. one can think of the level of competition in the banking sector, or the health of bank balance sheets. a successful capital markets union will open up entirely new channels for the transmission of monetary policy to the real economy, making central bankers much less dependent on a single sector for the transmission of its policy decisions. in that sense, central banks can diversify the channels through which they can influence the economy, adding to its effectiveness. 11. note that economic agents can benefit from capital markets union in a very similar way. households and firms can diversify their dependency on financing, if alternative sources of finance are in abundance, making themselves less vulnerable to risks stemming from a single sector. a well - diversified financial structure increases the resilience of the balance sheets of households and corporations to shocks. and the resilience of the economy as a whole. and when an economy is better able to cope with external shocks, monetary policy will not get distracted from pursuing its primary remit : delivering price stability. 12. the latter is even more relevant for monetary policy in a monetary union. structural differences between national economies imply that the euro area economy is prone to asymmetric shocks. private sector risk - sharing across countries can greatly enhance a smooth transmission of such shocks. this is what capital markets union can accomplish, for an increase in the cross - border holdings of financial instruments will enhance risk - sharing across the euro area, thus improving the functioning of the monetary union. 13. however, capital markets union is no silver bullet. clearly, its introduction does not absolve us from pursuing prudent policies in other policy areas, too. moreover, it will take time before we can reap the full benefits of capital markets union. but there can be no doubt that it will prove an important complement to banking union in enhancing the functioning of our monetary union. 14. at the same time, capital markets union will