Italian Business Confidence Unexpectedly Falls on Recession

Italian business confidence unexpectedly fell to the lowest since October as the country’s fourth recession since 2001 deepened, damping the outlook for an economic recovery.

The manufacturing-sentiment index decreased to 88.2 in January from 88.9 the previous month, Rome-based national statistics institute Istat said today. Economists had predicted a reading of 89.5, according to the median of 13 estimates in a Bloomberg News survey.

Confidence among Italian households unexpectedly fell this month to the lowest in at least 17 years as the recession damped optimism, Istat said on Jan. 28. The Bank of Italy this month cut its projection for 2013 gross domestic product to a contraction of 1 percent compared with a previous estimate of a 0.2 percent decline. Both the government and the central bank expect a recovery in the second half of 2013 led by increasing exports.

The Italian economy contracted at least 0.6 percent in the fourth quarter of last year, three times the rate of the previous three-month period, employers lobby Confindustria predicted in a report this week. Still, the euro region’s third-biggest economy has “touched the bottom of the recession,” according to the report.

As Italians prepare to vote in the Feb. 24-25 general elections, Italy’s economic and budget policies are up for review.

After increasing levies and cut spending to tame the sovereign debt crisis in his 14-month tenure, Prime Minister Mario Monti said that reducing the tax burden now is not “incoherent.” Pier Luigi Bersani, who leads a bloc of center-left parties leading in all opinion polls, has proposed cutting income tax rates on low and middle incomes while raising levies on high earners. Former premier Silvio Berlusconi is pushing for the abolition of a property tax on primary residence.

With assistance from {Giovanni Salzano} in Rome. Editor: {Zoe Schneeweiss}

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