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Wednesday, November 22, 2006

Consumer Confidence Index Rises in November

Italian consumer confidence rose in November. As can be seen from previous posts (and this one) the index is bobbing up and down, but it is still below the September high.

The Rome-based Isae Institute's index, based on a poll of 2,000 households, rose to 109.2 after falling to 108.6 in October. The reading beat the 108.8 median forecast of 18 economists surveyed by Bloomberg News.

``Growth has had quite a bounce-back this year and there will be some effect felt by consumers,'' said Robert Perry, an economist at 4Cast Ltd. in London. ``The headline unemployment numbers will also be comforting.''

Italy's economy is set to expand 1.7 percent this year, the fastest growth in five years, after stagnating in 2005, according to the European Commission. Italy's jobless rate fell to the lowest in more than 14 years in the second quarter, according to the latest available data.

Consumers are ``less concerned about the outlook for the labor market,'' Isae said in today's report. The employment gains helped increase optimism about consumers's personal economic situation and that measure rose to 115 from 113, Isae said.

Now it is very important to bear in mind at this point that part of the improvement in the labour market situation is due to a tightening in the labour market due to Italy's labour supply constraint as the population ages (as argued in this post), and in part this is one of the worries at the ECB, and one of the reasons that they are set on raising rates, which, from Italy's point of view is a far from perfect outcome. Remember Italy needs to keep the economy growing to maintain any sort of sustainability in public finances.

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