Italian Consumer Confidence Falls After Vote Amid Recession

Italian consumer confidence fell more than expected this month after the Feb. 24-25 election failed to produce a clear majority for a new government that can deal with the country’s fourth recession since 2001 and rising unemployment.

The confidence index declined to 85.2 from 86 in February, the Italian statistics office Istat said in Rome today. Economists had predicted the index to fall to 85.8, according to the median of six forecasts in a Bloomberg News survey.

On March 8 Italy’s credit rating was cut one level by Fitch Ratings as last month’s vote produced political paralysis that threatens the country’s ability to respond to the economic slump and to a joblessness rate at the highest since at least 1992. Fitch said it expects the euro region’s third-biggest economy to contract 1.8 percent this year. That compares with a March 21 forecast by outgoing Prime Minister Mario Monti’s government saying that gross domestic product will fall 1.3 percent.

While allowing Italy to keep its deficit within the European Union’s ceiling of 3 percent, Monti’s policy mix of higher taxes and spending cuts pushed Italy deeper in the recession. Those policies were refused by supporters of Beppe Grillo’s anti-establishment Five Star Movement that totaled about 25 percent of votes in the elections and obtained a blocking minority in the Rome-based Upper House.

As Italy’s manufacturers face contracting domestic demand, carmaker Fiat SpA brand sales fell 16.8 percent in February. Consumer spending will decline 2.4 percent this year after falling 4.3 percent in 2012, retailers lobby Confcommercio said in a March 22 report.