Italian June Retail Sales

Well, in many ways I don't find this surprising, but I do think it is relatively important:

Italian retail sales in June fell at the fastest pace in 15 months as higher borrowing costs and rising taxes left households with less money to spend.

A seasonally adjusted gauge of retail sales fell to 46.5, the lowest since March 2006, from 47.7 in May, according to a survey of 440 retail executives compiled for Bloomberg LP by NTC Economics Ltd. The reading held below 50, the level that signals a contraction in sales, for a fourth month.

So a combination of higher energy costs, higher interest rates, a high euro and higher taxes are all finally taking their toll, as I think it was quite predictable that they would. The recent consumer confidence reading would seem to offer additional confirmation.

And all of this is just one more reason why this wasn't very good news. The fiscal deficit issue, is, unfortunately, at some point going to rear its ugly head again.

Consumer confidence in Europe's fourth-biggest economy dropped this month to the lowest in a year as optimism was choked by the higher borrowing costs and rising energy prices, a report showed last week. Crude oil prices have risen 12 percent this year and are trading at almost a $70 barrel, boosting the cost of electricity and gasoline. Bills for housing, water and electricity increased 2.5 percent in May from the same month a year ago, government statistics show.


The drop in confidence and retail sales may weigh on growth in a country where consumer spending accounts for two-thirds of the $1.8 trillion economy. Italy has already trailed behind the euro region for 11 years and growth will lag behind this year, as well. The euro-area economy will expand 2.6 percent in 2007 while Italy will grow 1.9 percent, the European Commission forecasts.

Italian retailers fared worse than their European neighbors, according to today's report. In Germany, the euro area's biggest economy, the retail index rose to 49.2 from May's three-month low of 47.3. In France, the index fell to 48.2 after 14 consecutive months of growth. Those declines led European retail sales to fall for a second month.