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Italian Consumer Confidence Drops to 3-Year Low
Italian consumer confidence fell to the lowest in more than three years in September as austerity measures and Europe’s debt crisis sparked concern that the economy may slip into a recession.
The sentiment index fell to 98.5, the lowest since July 2008, from 100.3 in August, national statistics office Istat said in Rome today. That matched economists’ prediction in a Bloomberg News survey, according to the median of 16 forecasts.
The government led by Silvio Berlusconi has pushed through two packages of deficit cuts since July totaling about 100 billion euros ($134 billion). The plans included a levy on incomes over 300,000 euros and a 1 percentage-point increase in the value-added tax. The measures, passed to stem surging borrowing costs amid Europe’s debt crisis, may erode consumer spending and contain growth, retailers lobby Confcommercio said on Sept. 18.
The deficit-cutting steps didn’t stop Standard & Poor’s from lowering Italy’s credit rating for the first time in five years on Sept. 19. The week before, Moody’s Investors Service said Italy’s rating remained under review for possible downgrade given the “increasingly challenging economic and financial environment and fluid political developments in the euro area.”
Lower Forecasts
The International Monetary Fund last week cut its forecasts for Italian growth this year and next. On Sept. 22, the government also revised its estimates, saying the euro region’s third-biggest economy will grow 0.7 percent in 2011 instead of the 1.1 percent forecast in April and 0.6 percent in 2012 rather than 1.3 percent. That compares with the IMF’s forecasts for a 0.6 percent expansion this year and 0.3 percent in 2012.
The austerity moves also extend a freeze on civil servants’ wages, speed an increase in the retirement age and cut funding for regional government and ministries. The measures prompted the CGIL, the country’s biggest union, to hold a general eight- hour strike on Sept. 6.
Growth in Italy is being hurt by the global economic slowdown, rising borrowing costs from the debt crisis and the effects of “deficit-cutting measures that are indispensible without an alternative to quickly improve the public accounts,” employers’ lobby Confindustria said in a Sept. 15 report.
Retail sales fell in July for a third month, declining 2.4 percent from a year earlier, Istat said on Sept. 23. The government also forecast household spending to slow, saying that “in the medium term, the dynamic of the labor market could represent a risk factor” for consumer demand. Italy’s jobless rate was unchanged at 8 percent in July.
To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net.
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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