Italy's Recovery In Confidence Continues... Still A Ways To Go

Confidence is UP! Consumer confidence in Italy is at its highest since November 2007. Still since January 1992 the reading stand is at the 40th to 41st percentile of its range and in terms of the ranking among all previous observations. This it is some 10 percentage points below its middle position in terms of range or ranking percentiles. Ranking percentiles position a reading in a queue of values while range percentiles position the reading in a range bounded by the high and low readings. Both readings have some merit.

Past 12 month - Rating the past twelve months, the overall situation is rates as a -68 which puts it in the 55th percentile in terms of rankings. Prices trends at -48 are the worst in this period by either range of ranking methods.

The expected future - Looking ahead the next twelve months overall situation is assigned a value of +2 leaving it in the top 92nd percentile by ranking, but only the 65th percentile according to the position of the reading in its range. Obviously among all rankings this reading is relatively strong but there must be a strong reading that lies at a much, much higher level to depress the range reading so much. That would be a reading from June 2001, as from April to Sept of 2001 readings on this score soared then dipped back to a more normal range. Unemployment readings are still elevated at a +8 reading. That leaves the reading in the moderated 55th percentile by range but at a much higher 94th percentile by ranking. Those two readings tell us that the unemployment reading is rarely higher than this but it has spiked much higher in the past. The response to the household budget situation remains weak by any measure at a +1.

Current/Future comparisons - Households assess their current and future situations as about to be much improved in the next twelve months with their range and ranking percentile readings rising from a bottom quarter or third position currently to a 50% to two-thirds position in the outlook. Current savings are considered high, future savings are expected to be low. Similarly, major purchase environment was construed as middling over the past 12-months abut is expected to improve sharply to top 4% or better in the future.

Summing up - On balance these responses by Italian households show a clear disappointment with past trends. In that respect the expected future improvement is harder to read. Some of the future readings are more middling some are strong. It is still not clear if consumers simply are optimistic that things will improve from the dregs of the last 12 months or if things are expected to improved to true strong readings. As current conditions improve we will monitor these future readings and see if they continue to show the strength that some of the categories currently exhibit. If much better conditions are expected then as the current readings improve the future readings should remain high. If the future is simply expected to be ‘normal’ as the current situation normalizes the expectations readings in the survey will recede to a region of boredom.