July Retail Sales Take Another Hit

The good news first perhaps. Inflation in Italy is comparatively benign:

Consumer prices gained 1.9 percent from a year earlier, as calculated by European Union methods, matching the gain in June, the national statistics office in Rome said today.

and for the eurozone as a whole the position isn't much different:

"The euro-region inflation rate fell to 1.8 percent in July, from 1.9 percent the previous month, according to a separate report released today. That result sees European inflation holding below the ECB's 2 percent limit for an 11th month."

Would that the same could be said for retail sales:

Italian retail sales in July fell at the fastest pace in more than two years as the prospect of higher borrowing costs and rising energy prices squeezed household budgets. A seasonally adjusted gauge of retail sales fell to 46.1, the lowest since June 2005, from 46.5 in June, according to a survey of 440 retail executives compiled for Bloomberg LP by NTC Economics Ltd.

The European Central Bank has doubled its benchmark lending rate to 4 percent since late 2005, saddling Italians with higher loan payments at a time when rising oil prices and higher taxes are also eroding disposable income. Consumer confidence in Europe's fourth-biggest economy held near a 14- month low, a separate report showed July 24.

As they say, not only are retail sales down, consumer confidence is too. Someone somewhere is feeling the pressure.


Italian consumer confidence remained near a 14-month low in July, as rising interest rates and higher gasoline costs left families with less money to spend.

The Rome-based Isae Institute's index, based on a poll of 2,000 households, rose to 107.4 from 107.2, which was the lowest since May of last year.

The latest data from ISTAT (see graph below)only go back to May, however if we complement this picture with the data from NTC Economics the they have also - in all probability fallen further in both June and July. What the graph does make clear is that there was a large boost to retail sales in the final quarter of 2006, from which time they have fallen back, and have notably failed to recover.