Italian Confidence Levels Continue to Sink

Italian consumer confidence sank in October to 90.1 from 94.8 in September. The index has been engaged in a sinking trend since it peaked early in the recovery from the COVID crisis. The peak for the index was experienced in October 2021, the first month of data where observations became available for this survey after COVID struck and resulted in a one-month suspension of the survey in September 2021.

Consumer confidence is lowered by 8.3% over three months and by 23.9% over 12 months. The mean for confidence is at level 102 whereas the October value at 90.1 is substantially below this marker. The distribution of observations for confidence is such that the 90.1 level for the October index is at its 5.9 percentile ranking, which means confidence has been weaker than this less than 6% of the time on data back to 1997.

The evaluation of the overall situation (over the last 12 months) deteriorated sharply in October, falling to -138 from a -122 value in September. There's a sharp deterioration from August. The overall situation has fallen by 15 points over three months and 94 points over 12 months. The standing for the overall situation, a reading that applies to the last 12 months, is also in its lower 6 percentile.

The situation expected over the next 12 months improved in October. It rises to a reading of -13 from -19 in September and compares to a much weaker -22 level in July. The index is 44 points lower than it was 12-months ago but nine points higher than it was three months ago. The reading sits in the 29th percentile of its historic queue of data, telling us that it's been weaker less than 30% since May 1997.

Looking ahead to unemployment over the next 12 months, there's a slight deterioration to a reading of 20 and by that, I mean that the expectation for unemployment has risen; it's risen to +20 in October from +19 in September; it was at a level of 10 in July. Unemployment expectations are up by 10 points over three months and up by 26 points over 12 months. Unemployment expectations have been higher than this only 13% of the time since 1997. Concerns over unemployment clearly have risen and are now a palpable for the Italian worker.

The household budget for 12-months ahead show deterioration to +11 in October from +14 in September and it stands lower than it's been over the last four months; the budget assessment is down by 5 points over three months and down by 15 points over 12 months. Its standing is at its 52.5 percentile, which leaves it slightly above its historic median (it is also above its mean). This is one of the few readings the table that is not extreme.

The household financial situation over the last 12 months has a -55 reading in October, down sharply from -41 in September, and clearly the weakest reading in the last four months and below its historic mean which sits at a -36 level. The household financial situation over the previous 12 months has been evaluated as weaker than this only 11% of the time. However, it's the financial situation looking over the next 12 months that is most worrisome. It has fallen to a level of -41 in October compared to -36 in September and has the weakest reading over the last four months; it's fallen by 5 points over three months and fallen by 42 points over 12 months. The October reading now sits at the lowest level that it has experienced since May 1997. Concerns by Italians over their household financial situation have never been more extreme.

The environment for household savings improved for the current period. However, the reading for the future deteriorated. The assessment of the current period is 7 points higher over 12 months while the future expectation is weaker by 5 points over 12 months. The current assessment has a 92.8 percentile standing, which is extremely high, although future assessment has a 66.9 percentile standing, that is a top two-thirds standing which is moderately firm.

The assessment of the time being right to make a major purchase currently fell to -52 in October from -42 on September. This response is 13 points lower over three months and 41 points lower over 12 months. It has a 6.6% standing on data since May 1997. Consumers are obviously concerned about making major purchases and about unemployment, and these are major reasons while consumer confidence overall is so weak.

The business confidence index also deteriorated in October, falling to 100.4 from September’s 101.2. The current reading for October is the lowest over the last four months and it's fallen by 5.3% over three months and by 12.5% over 12 months. The business index has a 32-percentile standing, placing it the lower one-third of its historic queue of values.

Summing up Consumer and business confidence clearly are very weak in Italy. They're slipping in October, but they have been slipping for some time; the chart shows the decline stemming back from recovery from the COVID has been relatively severe and ongoing for both consumer and for business respondents. Italy, as a member of the European Monetary Union, continues to face rising interest rates from the European Central Bank, and it also has its own version of the European inflation problem. Italy has just recently seated a new government and it's still not clear how that it's going to work out – this is Italy and instabilities are more the rule than the exception. There are substantial and significant cross currents within Italian politics as some of the socialist Italian parties continue to have strong ties to Russia among them former Prime Minister Silvio Berlusconi who remains active in Italian politics.