Italian Inflation March 2008

This is not good news at all. According to preliminary data released today by ISTAT Italy's inflation rate in March rose to the highest in more than 11 years, driven by gains in energy prices and a surge in the cost of food and housing. Consumer prices calculated by European Union standards rose 3.6 percent from a year earlier, up from last month's 3.1 percent rate, which had previously been the highest rate since the index was created in January 1997.



Consumer prices rose 1.6 percent in March from February, which is a very rapid rate indeed (annualised 18%). The rate of price increases has clearly accelerated and Italy - which has very low economic growth at this point (probably near zero, or worse) - could be said to be suffering from some variant of stagflation. This will not make it at all easy for the ECB to bring any kind of early reflief in the form of rate cuts (which could be just as important for their impact on the current high value of the euro which is crimping Italian exports, as for any easing of lending conditions) in the near future.

Italian transportation costs, which include gasoline, rose 1.4 percent from a month ago, and 5.8 percent from a year ago, based on the statistics institute's calculations. No breakdown was given of the EU-harmonized index. Prices of housing, water, electricity and fuel increased 4.4 percent from a year ago.

Food and beverage costs in Italy rose 0.7 percent from February and 5.5 percent from a year ago, led by increases in the prices of bread, cereal and pasta. Cereal costs rose 10 percent, bread was up 13 percent and pasta prices jumped 17 percent from a year ago. Fruit rose 6 percent and milk went up 10.5 percent.