Italy's ISAE Sector Confidence Rebounds Then Retreats

The Italian business and consumer confidence readings are excellent examples of what much of Europe is going through right now. Italian confidence was hard-hit on the encroaching virus early in the year. It then snapped back sharply if not fully. And now with virus spreading, confidence is again weakening with a sharp stepdown from the consumer and less sharp stepdown for businesses. But business confidence while stepping down less on the month is already at a lower ebb than consumer confidence. The business confidence index has only a 9.4 percentile standing while its consumer index counterpart has a 25.8 percentile standing. Although the consumer standing is much higher in percentile terms, both in fact are very weak in practical terms.

These indexes make some of the push back and furor in Italy against the new restrictions meant to contain spread of the virus a bit easier to understand. Maybe that push back still is not right, but these statistics should illuminate the mindset of Italian households.

The Italian assessment of the overall situation over the last 12 months dropped to a survey value of -144 in November from -138. It takes on a one-percentile standing – that means it has rarely ever been weaker. That means that Italians, coming into this survey period, were not happy campers.

Over the next 12 months, the survey value for the overall situation drops to -5 from +8 and registers a 45.4 percentile standing. That is not terrible, but it is below its historic median (rank medians occur at a percentile standing value of 50) and keeps the environment assessment ‘below normal' after a period that as rated as abysmal (-144!).

What worse (worst?) is that the unemployment response jumps to +36 from +10 to a 98.4 percentile standing. The fear of unemployment in Italy is palpable. This is the key response in the table and represents the overriding concern of the Italian people. They are more worried/certain of unemployment now than ever (That is almost literally true, not just an expression!). The problem is that they have lived through one shutdown and did not like it and now they fear another dose of the same ‘medicine.'

The household financial situation over the last 12 months actually has improved a tick on the month to -33 from -34 as it took on a 62.7 percentile (moderate) standing. But over the next 12 months, the expected situation reading dropped to -14 from -7 and plunged to a 19.0 percentile standing, a lower one-fifth historic reading.

The environment for making major purchases drops to a raw survey reading of -36 from -27 and to a standing at its 57.2 percentile- still above its historic median. It is a bit hard to square this standing on making a major purchase with the extremely high standing on unemployment fears, but these are the survey results I only report them- I cannot psycho-analyze them.

Summing up
Still, the survey is quite clear that the fear of unemployment in Italy is exceptionally high and the fear of how the future will unfold has ratcheted higher as well. The business confidence index slipped on the month and overall has a much more dire standing than for the confidence for households. However, together these are disturbing results. They explain a lot about why Italians are uncomfortable with the notion of further economic restrictions- right or wrong. And while this survey is not any more probing and specific, there is also anxiety among those who think ahead about what the post-covid-19 world will look like and how all this debt that has been accumulated to get through it is going to be handled. In these respects, Italy hardly stands alone.