Italian consumer confidence remained near its lowest level over two years in February as rising energy prices, accelerating inflation and a certain degree of political uncertainty weighed on consumer optimism.
The Rome-based Isae Institute's consumer confidence index, based on a survey of 2,000 families, rose ever so slightly to 103 from 102.2 last month. If we exclude last months even lower reading this is still the lowest since August 2005.
A measure of optimism about the general economic situation rose to 82.6 from 80.9, though pessimism about personal finances worsened to minus 5 from minus 2, and concern about rising prices was at a four-year high, the report said. Isae said.
Italian consumer prices rose an annual 3.1 percent in January, the highest in at least 11 years and industrial production declined for a fourth month in December. Italian retail sales dropped last month at the steepest pace in four years.
Italy's economy, the fourth biggest in Europe, may grow as little as 1 percent this year, the Bank of Italy predicted Jan. 15. That compares with a July forecast of 1.7 percent. The government's next official predictions will come out in March.
One other factor in the confidence situation is evidently the election campaign which is now underway, following the collapse of Prime Minister Romano Prodi's government on Jan. 24 after 20 months in power. Both leading candidates, two-time premier Silvio Berlusconi and former Rome Mayor Walter Veltroni, are promising tax cuts as their "remedy" to revive growth. This position is barely credible, since given the economic slowdown and the likely increase in Italy's already massive public debt that this will lead to, it is difficult to see where - if anywhere - there is room at the moment for tax cuts, unless, of course, you countrebalance this with a major cut in health or pensions expenditure, but then, perhaps this is the part you shoul really be explaining to the voters first.