Take the latest announcement on retail sales, as published in the Wall Street Journal:
In Italy, the national statistics office Istat said retail sales, which aren't adjusted for inflation, rose 2.7% on the year in February after a 1.0% rise in January, while month-on-month they rose a seasonally adjusted 0.3% after a 0.2% rise in January. The statistics agency said sharp rises in fuel and commodity prices were behind the rise.
Now this gives the impression that somehow or other sales are rising - by 2.7% year on year, which wouldn't be bad. Indeed if we went back over the months we would get a chart for 2006 and 2007 that looked something like this:
Which is far from dynamic, but does give the impression that there is some life left in Italian retail activity. But if we stop for a minute and think about the fact that Italian CPI inflation was running at 3.1% in February we would discover (as a rough approximation, subtracting the CPI from the non inflation adjusted sales data) that Italian retail sales actually contracted by 0.4% year on year in February, and we would get a chart going back over the last couple of years that looked something like this:
which shows the near constant contraction which has been going on in the Italian retail sector despite the increase in employment and the decline in unemployment. Looking at things this way also solves another mystery: the apparent disparity between the ISTAT retail sales data (as commented on in the economic press) and the retail sales purchasing managers index, which regularly shows sales contracting.