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Economy in Brief

Terrible Consumer Sentiment in Italy.....The Movie: Halloween, Italian Style Without Jaime Lee Curtis
by Robert Brusca  June 22, 2012

Italy's consumer confidence looks like it is about plunge right off the chart. The confidence measure has dropped by over one point in June and is at a new all-time low.

And as we peruse the components they are disaster-struck. The relative BEST reading is the overall situation for the past 12-months at -35 which is positioned in the 68th percentile of its historic queue. That is a surprisingly high standing for such a deeply negative number. Moreover, the past 12-months have been no picnic and for that reading to score as the top 32% (top third) of the queue for the Italian consumer says something about how Italians now view the future.

Never on a Sunday, or Monday, or Tuesday...Indeed, the overall situation for the next 12-months has a raw score of -32 which leaves it in the bottom 0.3% of its historic queue (yes, that's the bottom one-third of one-percent, not a typo). One of the worst values ever. Unemployment prospects are in the 99.5 percentile of their historic queue. Higher unemployment is seen as about as certain as ever. The household budget, looking ahead, is the worst ever. Worst ever...

The household financial situation over the last 12-months is scored as a bottom 9% standing while the next 12-months score as a bottom 1.4% standing. Terrible readings all.

The savings readings are somewhat odd and at the same time telling. Italians say it is a good time to save with a score that is in the top 10% of its all-time range. Well if times are so bad, how can they be so bad if households can save? The answer is in the outlook for savings which stands in the bottom 5.5% of its historic range. Basically it looks like Italians are so freaked out they feel they have to save now because they will not be able to save in the future. The financial environment has been very bad; it is going to get worse. The Italian consumers have NO ILLUSIONS about the future. There will be no Dolce Vida. Some may fear for their simple 'Vida'.

Cold hard facts no denial...This survey says the Italians see the cold hard facts du jour. But for now, Italy's politicians are still trying to dodge biting the bullet but the people seem to have gotten the message. I don't doubt that it is a bad time to be an Italian politician, technocrat or otherwise. But the hand writing is on the wall. Greece is in the gutter, Spain's banks are all dressed up with nowhere to go and still being coddled by a stress test that hardly looks any more realistic that the pabulum from the past.

If you wanted to update Grimm's Fairy Tales, you could add a couple of chapters on the stress test assessments done in Europe since the financial crisis. There has been no greater fantasy. Italians KNOW their banks are not in good shape either, but they have not been making headline recently.

The final element for Italian confidence is the current index which stands at a -46 and at that is only in the bottom 25% of its historic queue.

Cleary Italy is challenged and troubled. Its people 'get it.' Its politicians are either in denial or simply do not know what to do next. Certainly all the posturing in Greece and Spain suggests Europe is still very much involved in using Kabuki to make policy. That does not give the right signals to Italy or to others to solve their current problems.

There is one very important reason to stop fooling around. Fooling around does not help Greece or Spain to make the hard choices they must make. And it sends the wrong signal to others who have their own bullets to bite. Europe has frittered away a lot of its time and lost flexibility. The Italian consumer can sense it.

Elsewhere in the Zone...My sense is that today's IFO for Germany which showed expectations plunge as current conditions improved is not exactly a view of reality for Germany; Germany is in a different space from Italy, for sure. Non-Zoner Switzerland IMPROVED its growth outlook. But these are not isolated economies they are only partly insulated from these events in the Zone. The knock-on effects are in train. Germany's exposure to losses though its backing of the ECB and the LTRO loans it made and through the target2 balances at the ECB (only a problem if the euro breaks up!) cannot be dismissed and should not be downplayed. Germany has much more skin in the game' than it might seem.

Everyone can understand German resistance to giving everyone else a 'fourth second-chance'. The 'debtors' must do more. It's not about hitting fiscal targets as much as plugging holes and collecting taxes and getting rid of stupid work rules and excessive pay and vacation promises – especially to the all-too-insulated 'public servants.' No one can hit fiscal targets when the economic bottom falls out. But there are things that can be done to buy, to earn, to demonstrate credibility and the Mediterranean countries need to do those things NOW - right NOW. The Germans need to decide if they want to be a member of this club or not. Being a member implies responsibility and yes for your neighbor, too. It's not just keeping your own lawn cut and weed free. The German fiscal idea that divides Europe into a 'Japanese lunch box' with everyone minding his own budget surplus in his own little walled off cubicle is not much of a united Europe is it? That plan needs to see the cold hard light of reality. As a friend of mine says: it's time to take the bull by the tail and look the situation right in the eye.

Italy ISAE Consumer Confidence
    Since 1993 Rank
  Jun-12 May-12 Apr-12 Mar-12 %ile Rank %ile
Consumer Confidence 85.3 86.5 88.8 96.1 0.0 365 0.0%
Last 12 Months
OVERALL SITUATION -35 -36 -42 -43 75.7 116 68.2%
Next 12 Months
OVERALL SITUATION -32 -25 -27 -20 0.0 364 0.3%
UNEMPLOYMENT 35 32 30 23 93.8 2 99.5%
HOUSEHOLD BUDGET -9 -7 -6 0 0.0 365 0.0%
HOUSEHOLD FIN SITUATION
Last 12 months -42 -41 -42 -36 20.4 332 9.0%
Next12 months -27 -25 -28 -15 16.3 360 1.4%
HOUSEHOLD SAVINGS
Current 60 62 59 60 72.6 35 90.4%
Future -37 -41 -43 -35 23.4 345 5.5%
MAJOR Purchases
Current -46 -45 -50 -42 26.9 273 25.2%
  Total number of months: 365 Back to Feb-82  
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