November Retail Sales Don't Look Good

Despite the fact that the November retail sales data across the euro region is quite positive, sales in Italy declined when compared with October:

Italian retail sales fell for the second month in November as the government's plan to raise income taxes curtailed spending.

An index of retail sales stood at a seasonally adjusted 48.0 compared with 47.4 in October, according to a survey of 440 retailing executives compiled for Bloomberg LP by NTC Economics Ltd.

Remember that on all these indexes any reading below 50 signals a contraction.

Italian consumers are facing a double whammy as the ECB raises rates at the same time as the government is set to considerably raise taxes (rather than cut spending) to address the deficit problem. Thus Bloomberg:


The higher taxes are hitting Italian consumers at a time that interest rates are also rising, making consumer loans and mortgages more costly.

As they suggest this contrasts with the eurozone sales data:

The drop in retail sales in Italy contrasts with increases in Germany and France. Sales in both those countries rose, lifting the European index to a record high.


Retail-sales growth accelerated in the euro region for a third month in November, giving the European Central Bank more scope to raise interest rates next year, the Bloomberg purchasing managers index showed.

An index of retail sales in the economy of the dozen nations sharing the euro rose to a seasonally adjusted 53.7, the highest in four months, from 52.8 in October, a survey of more than 1,000 retail executives compiled for Bloomberg LP by NTC Economics Ltd. showed today.

Of course rising interest rates also mean a rising euro, and this will also have an impact on Italian exports, although the extent of this impact still remains to be seen.

Paris is looking on the bright side of things, and points us to the latest data on public finances. There is no doubt that 2006 has been an exceptionally good year by Italian standards, but can we be so optimistic for 2007?


Negli ultimi documenti governativi di politica economica - la Relazione previsionale e programmatica per il 2007 con l'annessa Nota di aggiornamento al Dpef - il deficit pubblico stimato per il 2006, al netto dei debiti pregressi legati ai rimborsi Iva sulle autovetture e alla Tav/Ferrovie, si ferma al 3,6% del Pil, rispetto al 4,0% indicato nel Dpef 2007-2011 presentato in luglio e al 4,1% realizzato nel 2005

However if we look at the details we find:

Il miglioramento dei conti proviene quasi tutto dal lato delle entrate tributarie; il gettito fiscale è aumentato, infatti, nel corso di quest'anno in misura ben superiore alle stime iniziali. Nella Relazione trimestrale di cassa di aprile, ultimo atto ufficiale del governo uscente, le entrate tributarie totali erano calcolate in 407 miliardi di euro. Tre mesi dopo, il Dpef alzava la stima a 417 miliardi, che il recente aggiornamento ha portato a 435 miliardi.

A large part of this has undoubtedly come from the exceptionally high growth (again in Italian terms) seen in 2006 (a year which has, after all, broken all global records). If this expansion in receipts is not maintained in 2007, however, the position may once more deteriorate, so there is really no room for complacency here.