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Economy in Brief

ISAE Consumer Confidence in Italy
by Robert Brusca June 21, 2007

Italy’s consumer confidence fell off after peaking in February 2002. It bottomed in May 2004 and has been on a moderate rising trend ever since. But since March of 2007 a new down trend has developed.

The new weakness in Italy’s consumer confidence could be as simple as high oil prices. The recent surge in oil prices has become a problem for consumers around the world. But it could also have other factors at work. The responses to ISAE’s survey make me think that the latter broader scenario is the correct one.

Overall consumer confidence in Italy is 39% of its peak relative to its trough, a weak showing. However consumers do not assess the past 12-months harshly. Their rating leaves it in the 66th percentile of its historic range. The household financial situation during that period however sank to a range position just 17% form the bottom. As a result, consumers rate their current savings as the highest of the period as they seem to have reacted by ramping up savings and spending less than they might have been able to afford. Major purchases are rated in the bottom third of their range currently.

Ominously, for the period ahead, Italian consumers are very glum. They rate the overall conditions in the next 12 months in the bottom fifth of their range. Unemployment is rated in the top 20% of its range; consumers rate their own budget as the worst ever. They do not expect to be able to compensate and save as they rate future savings as in the bottom third of its range.

The responses from the Italian consumers are striking for their equanimity in assessing the past 12 months which then morphs into outright pessimism for the period ahead. Italy’s retail sales trends have reflected this sort of borderline angst for some time. Italy is of course one of the weaker large economies and seems to have trouble with its competitiveness. Italian industrial statistics including foreign orders have been afflicted with weakness, or at least a slowing trend. While unemployment has been dropping steadily in Italy it is clear that consumers do not extrapolate that success into the future. Is Italy alone in this, or is this sort of pessimism a harbinger of things to come in the rest of Europe?

ITALY: ISAE CONSUMER CONFIDENCE
          Since 1990
  Jun-07 May-07 Apr-07 12-MO Avg AVG Max Min % Range
CONSUMER CONFIDENCE 107.2 109.4 107.8 -110 -112 128 94 39.5%
Last 12-Mos
Overall Situation -60 -52 -55 57 68 -17 -147 66.9%
Price Trends -27.5 -24.5 -26.5 24 16 4 -34 17.3%
HH Financial Situation -40 -35 -38 36 27 0 -49 18.4%
Current
HH Savings** 78 77 73 -71 -62 78 49 100.0%
Major Purchases** 25.5 23.5 23 -24 -28 41 18 34.8%
Next 12 Months
Overall Situation* -22 -18 -17 17 11 24 -34 20.7%
Prices Trends 19 17.5 15.5 -16 -24 49 7 28.6%
Unemployment 2 -5 -5 5 5 9 -30 82.1%
Budget -1 3 2 -7 -20 40 -1 0.0%
Purchases planned** 10.5 8.5 7.5 -10 -11 20 4 40.6%
Future
**Savings 26.5 26.5 23 -27 -34 43 20 29.8%
* Since Nov 1998, index is More +0.5 'Probable' or +0.5 'same' depending on category
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