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Hi everyone. Well I am starting this post off in a rather unusual fashion. Since the main message in this post is rather pessimistic (consumer confidence just plummeted), I thought I would try and give things a slightly different slant by offering my own personal dose of measured optimism. In the photo above you can see Nanni Morreti and Alessandro Gassman sitting on a park bench. The excuse for this engaging and seemingly everyday scene was the recent film by Antonello Grimaldi - Caos Calmo - which I went to see (and thoroughly enjoyed) last weekend.

Now Moretti is an individual with whom, on the surface, I would seem to have relatively little in common, since I am in no way sympathetic to his ideological stance. On the other hand, I do admire his enormous creativity, his willingness to take artistic risks, and his ability (as so well symbolized by his improvised "headquarters" in the park in Caos Calmo) to organize and mobilize the physical and intellectual space he has around him. He is, after all, an artist.

So in many ways what Moretti does in the Grimaldi film could be thought to represent a kind of metaphor for what Italy now so badly needs: a redefinition of its corporate values and a reorganization of its institutional space. And with that little homily, now on to....

Italian consumer confidence in July slumped to the lowest since 1993, when the country was - we should note - in a recession. The Rome-based Isae Institute's index, calculated from a survey of 2,000 families, fell to 95.8 from a revised 99.9 last month. In November 1993, the 26-year-old index hit a record low of 95.4.


A sub-index measuring optimism about the broad economic situation dropped to a 14-year low of 72.2 from 81.6, Isae said today in its report. A gauge of households' perception about their short-term prospects decreased to 88.4 from 97.6.

Italian families are cutting back on spending, including putting off car purchases and eating out less, the institute said. And in June retail sales declined for the 16the consecutive month, the Bloomberg purchasing managers index showed on June 27.


Sales in what is still Europe's second-biggest car market fell 19.5 percent in June, a sixth straight monthly decline. Registrations at Fiat fell 16.5 percent in the month and the company has announced that it will temporarily shut four of its six Italian factories for three weeks between September and November because of weaker demand.

According to forecasts from both the Bank of Italy and ISAE the Italian economy will expand by only 0.4 percent this year, the slowest pace since 2003. And even this must now be subject to downside risk - i.e. we may even see an annual contraction, it all depends in my opinion on whether we see a rebound in Q4. Basically I will stick my neck out at this point and say that this latest consumer confidence index makes it quite probable that Italy is already in a technical recession (two consecutive quarters of negative growth). One of the charts which has impressed me most in recent days is this one prepared by PNB Paribas (in an analysis of the Spanish economy):

What we can see above is a comparison (for Spain, I simply haven't had the time to do one for Italy) of quarterly consumer confidence and private consumption with a one quarter lag (that is consumer confidence of the earlier quarter compared with actual spending in the subsequent one. As can be seen the fit is pretty close, which means that apart from the slight rebound in May we are now looking at a very dismal outlook for private spending from April through September, hence my feeling that we will see negative growth over these two quarters.

Source: Italian Consumer Confidence Down Again In July