Italy Inflation Rate Remained at Six-Month High in April

Italy’s inflation rate unexpectedly remained at a six-month high in April amid higher energy costs and tax increases passed as part of Prime Minister Mario Monti’s austerity program.

The inflation rate based on European Union measurements was unchanged at 3.8 percent, Rome-based national statistics office Istat said in a preliminary report today. That was more than the median forecast of 3.6 percent by 12 economists in a Bloomberg News survey. Prices rose 0.9 percent from March, Istat said.

Italy’s consumer confidence plunged this month to the lowest since 1996 as Monti’s austerity measures deepened the recession that began in the fourth quarter. Rising crude prices and the government’s increase of value-added taxes led to a jump in gasoline costs that neared 2 euros ($2.65) a liter last week, crimping domestic demand. Business confidence also declined to a two-year low amid concerns the recession may deepen.

Gasoline prices rose 3.1 percent in April from the previous month and 20.8 percent from a year earlier, the fastest pace since the data series began in 1996, Istat said today. European inflation slowed in April as energy costs increased at a weaker pace than a year ago.

Euro Region

The inflation rate in the 17-nation euro region fell to 2.6 percent from 2.7 percent in March, the European Union’s statistics office in Luxembourg said in an initial estimate today. Economists forecast consumer prices to rise 2.5 percent from a year ago, the median of 37 estimates in a Bloomberg News survey showed.

European Central Bank President Mario Draghi said last week that inflation risks in the euro area are broadly balanced. “Upside risks could stem from higher than expected oil prices and further indirect tax increases,” Draghi said in Brussels on April 25. “Downside risks could arise from weaker than expected economic activity.”

The Rome-based Treasury said in an April 19 report that the planned inflation rate will fall to 1.5 percent this year from 2 percent in 2011.

Based on Italian methodology, prices gained 0.5 percent in April from the previous month and advanced 3.3 percent from a year earlier, Istat said today.

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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