Italian Business Confidence Fell in April on Political Gridlock

Italian business confidence fell as February’s inconclusive elections left the nation’s parties struggling to build a government strong enough to confront the country’s recession.

The manufacturing-sentiment index dropped to 87.6 in April, from a revised 88.6 the previous month, Rome-based national statistics institute Istat said today. Economists had predicted a reading of 88.9, according to the median of 8 estimates in a Bloomberg News survey. The index is based on a poll of about 4,000 businesses.

Italy’s political stalemate came to end this week as Enrico Letta, the third-youngest Italian premier since World War II, tapped rival political parties and non-politicians to build his 21-member Cabinet. His new government was sworn in yesterday and he will make his first address to Parliament at 3 p.m. in Rome, before facing confidence votes in both houses to install the new administration more than two months after the February vote.

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Letta named a record seven women, including former EU Commissioner Emma Bonino as foreign minister. He also appointed Bank of Italy’s Director General Fabrizio Saccomanni as finance minister. Saccomanni worked under Mario Draghi when he was Bank of Italy Governor before Draghi left to become president of the European Central Bank.

Consumer confidence unexpectedly rose in April as the gridlock that left Italy without a new cabinet moved to an end. Earlier this month, the Bank of Italy said in a report that the economy contracted“less sharply” in the first quarter than in the previous three months. Italy’s budget deficit fell last year to the European Union limit for the first time since 2008 as austerity policies offset the effects of the economic slump, official EU figures showed on April 22.

Still, industrial output fell more than economists expected in February as export growth failed to make up for the falling domestic demand, Istat said April 10.

The business confidence index declined in April as executives grew pessimistic about the outlook for orders and production, today’s report showed. Istat originally reported a business confidence index at 88.9 in March.

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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