The Institute of Studies and Economic Analysis's (ISAE) index of Italian consumer confidence fell 4.1% from June to 95.8 (1980=100) in July, the lowest value since May 2004. Consumers' biggest concern appears to be the general economy, the index for which declined 11.5% in July, next in line is concern over future prospects, the index for which declined 9.4%. The indexes for current conditions and personal economic situation were down 0.1% and 0.9% respectively. These major components of the consumer confidence index are shown in the first chart.

Although the decline in confidence was not unexpected, its magnitude was greater than the consensus expected. Among the reasons advanced for the deterioration in confidence are the increases in food and oil prices. The second chart plots the food and the electricity and fuel components of the Consumer Price Index. They are plotted on a log scale where percentage changes can be compared. The recent acceleration in the prices of both food and electricity and fuel is evident. Earlier this month the declines in purchasing power caused by rising food and fuel costs led to public demonstrations.