With Italy In Recession Consumer Confidence Declines Further In November
Italian consumer confidence fell back to its lowest in three months in November. The Isae Institute’s consumer confidence index dropped to 100.4 from 102.2 in October.
“Recession news may have dented household morale more than the market turmoil,” said Marco Valli, an economist at UniCredit SpA in Milan. “In the next few months darkening savings and labor market prospects should add to the gloomy outlook.”
Italy entered its worst recession since 1992 in the third quarter of 2008. The Italian government is scheduled to present an 80 billion-euro ($101 billion) stimulus plan on November 28, and the government also plans to increase the funding for temporary unemployment benefits as joblessness rises. However with approximately 103% of GDP outstanding in debt and a substantial bank bailout to finance, possibilities for additional counter cyclical spending are limited.
According to the newspaper l’Unita at least 400,000 Italian workers with temporary contracts may lose their jobs by the end of the year, citing data coming from a study carried out by the country’s biggest trade union, CGIL. The union forecasts that almost one in four of the 1.8 million part-time workers in Italy’s private sector will not have their contracts renewed at the end of December.
And the outlook next year seems to be even bleaker. The recession is almost universally expected to deepen ,and the International Monetary Fund forecast earlier this month that Italy’s economy will contract 0.2 percent this year and 0.6 percent in 2009. The IMF itself, in their latest Article IV Consultation Report – published on 20 November – described the outlook for the Italian economy as “bleak.”
“Beyond the present cyclical slowdown, the real economic crisis confronting Italy is the decline in productivity over the last decade, which has spawned stagnating incomes, rising unit labor costs and tepid growth,” the IMF said.
Obviously Italian consumers are getting some relief from the sharp drop in oil prices which means that gasoline and heating costs are falling as is the inflation rate, which has been falling steadily back from a six-year high of 4.1 percent in August. Thus the level of the consumer confidence index is still somewhat above the very low level we saw back in June. But having consumer confidence lying around just above all-time lows is hardly much consolation at this point I think.
Originally published at the Euro Watch blog and reproduced here with the author’s permission.
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