Economy in Brief

Italian consumer and business confidence both rose in May. Consumer confidence rose sharply following a sharp drop in April; the main confidence level brings it back up above the level for March. Business confidence has been relatively stable; after a slight slouch in April, business confidence is back up and it too is slightly above its level for March. However, consumer confidence in Italy continues to be relatively firm relative to European standards. While consumer confidence in Germany is extremely low, Italy’s consumer confidence has a 70.7 percentile standing on data back to January 2006; Italian business confidence is much weaker with a 23.7 percentile standing. Italian consumers are feeling solidly but moderately confident while Italian businesses appear to be experiencing a great deal of anxiety. However, for Italian businesses while the level of anxiety may be high, a reading of 86.5 for confidence in May is the same as its average over the last 12 months.

The Past 12 Months Consumer confidence in Italy finds an improvement in the overall situation over the last 12 months, with a reading of -69 in May compared to -80 in April. Price trends over the last 12 months have a reading of 20.5 compared to 16 one month ago, showing that inflation pressures have increased. The household financial situation over the last 12 months was only slightly stronger than what it had been in April and continued at its 12-month average. On balance, the standing for these three readings over the last 12 months is between their 61st and 77th percentiles in terms of rankings; that means all of them are above their historic medians and moderately firm.

Currently The current situation finds household savings slightly better off in May compared to April, and the environment for making major purchases also improves to a reading of 33 compared to 31.5 in April. The major purchase reading is slightly above its 12-month average while the savings reading is slightly below. The ranking for the savings metric is in its lower 21-percentile while the ranking for the major purchase response is in its 66.8 percentile, a moderately positive and stable reading.

The Outlook Turning to the outlook for the next 12-months, the overall situation assessment improved to a -20 reading from -26 in April, putting it back at the same level it had in March and leaving it below its 12-month average as well as at a low rank-standing at its 10th percentile. That’s a far cry from what it had been over the past 12 months. Price trend eased after spiking a month ago and are below their March reading but above their 12-month average and with an 87.1 percentile standing. Inflation concerns clearly linger. Unemployment expectations in May are back to their 12-month average and nearly at their historic median on a ranking of 49.1%. Carrying the confidence readings higher, the household budget and planned purchase responses both rose in May and are above their respective 12-month averages with a budget ranking at its 97.4 percentile and a planned-purchase ranking at its 94.8 percentile. These are very strong reading components in the outlook measure.

The future savings reading stepped lower in May and is below its 12-month average, but it has a queue percentile standing in its 80.6 percentile and remains strong despite some monthly erosion.

Germany has some degree of improvement and revival underway that has lasted for three months running on its headline GfK index. The degree of improvement monthly has been small, and the pace of improvement is slow. Economic expectations have improved for four months running, marking more improvement than for the GfK headline (GfK components lag the headline by one month). Income expectations have improved for three months running, marking some steady moderate-sized improvements. The propensity to buy has also logged a couple of monthly improvements but its recent observation for May shows a step back to -6.4 from -4.9 in April, ending its short winning streak.

Percentile standings The levels of these monthly variables show a weak headline with a standing in its 12.9 percentile historically, on data back to 2002. The component rankings fare better, with the economic expectations response above its historic median at a standing in its 65.1 percentile. Income expectations are rising and closing in on their own median (median of ranked data occurs at a ranking of 50%) with a standing in its 46.8 percentile. However, the propensity to buy index continues to lag with a standing at the one-third of queue mark, at its 33.1 percentile.

Other countries The table also presents data for consumer confidence for Italy, France, and the United Kingdom; the former two are fellow members of the Economic Union, and members of the EMU (U.K. is a former EU member). These reading lag, more like the components of the GfK survey. For Italy, the lag is larger, at two months. Italian confidence shows ongoing erosion with the current reading at a rank standing of 59.8 percent, above its historic median on the same timeline as for GfK in Germany. The French confidence reading shows signs of recent slippage and presents a monthly value with a standing at its 37.9 percentile. Italy, France, and the U.K. all reached recent local lows around August 2022 and have since mounted more or less synchronous rebounds. During this period, the Italian rebound was stronger. But the rebounding has largely ended and now the consumer indexes in Italy, Frane, and the U.K. are rolling over giving into weakness. And this is at a time that the Germany survey generally is strengthening – albeit mildly.