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.
9 comments:
You are right when you say that ISTAT is not reliable. Of course data are correct, but they are biased by political reasons. It depends on the government agency which requested the analysis. Data are always collected to give or not give some evidence. I had a direct experience about divorces and fostering. All data are collected ignoring specific areas and researching only where they could demonstrate specific results.
Hello Dario,
And thank you for sharing your experience.
"Of course data are correct"
Yes, I think no one is doubting this. Data can be of better or worse quality from one country to another, but it is normally in places like Argentina or Russia that the data is actively "rigged".
The question is the way the data is structured and presented, and the care (and pride) which is taken in seeing that data is complete. I think what makes the difference between a good national statistics site and a bad one is the feeling that the people who work there put into their job - rather like the way you can go in one bar and get an excellent cup of coffee and then into another and find what amounts to little better than "dirty water". Try Estonia's site if you want to see something which is well designed, and with ease of accesss to data, capacity to generate excel sheets. You can almost feel the enthusiasm of the staff. They are only a small country, yet they are proud of it. And what is more, even as the data turn against them, and they enter an important recession, they keep churning it out.
Since the comparison Spain-Italy is often made, a quick glance at the Spain INE site is also instructive. When people say Italy needs to change, then I would say it needs to change starting from ISTAT.
I get to see a lot of data in my activity as an economist, and the differences between countries are very noticeable, and probably reflect something deeper about the society in question. Demand from citizens for tranparent and easily accessible information, communal trust etc.
I mean, just as an example check out the English language page of the ISTAT - this has been "under construction" for more time than I care to remember. No self respecting "emerging economy" would be happy with this - apart from anything else they are all actively seeking investment, want good credit ratings, and want to present a user friendly approach to investors. Those running Italy - whether from one governing party or the other - seem to feel no urgent need for any of this.
I would say this represents a tragedy, since Italy may be throwing away its future here. In area after area it is slipping behind. I don't know whether you like football or not - I happen to be a Barça fan - but I would say what you need right now is a reaction from the team. And from the whole team, from top to bottom. No one is too humble here to be able to be satisfied with shrugging their shoulders and simply saying "it's all their fault". We all need to look in the mirror from time to time.
OK. Moral homily over. Now I'm back to the data.
Dear Edward,
I totally agree with you. However I do not think that the way ISTAT collects, analyzes, and publishes data is by accident. Data are a powerful mean to control people, to drive public opinion, to sustain initiatives or to attack adversaries. You said «Those running Italy - whether from one governing party or the other - seem to feel no urgent need for any of this.». I personally think that this is done on purpose. They do not want to change, because they want to protect what in Italy we call the "Casta", that is a new aristocracy which is not
so different from the ancient ones. Our country is not vertically divided, that is, left vs right parties, but horizzontally: people vs who owns the power. With respect other countries, there is a STRONG control to keep well separated the two parts and to avoid new competitors in the top side (please, excuse my poor English but it is not my first language).
By the way, I read your articles and they are very clear: a honest but critical analysis of ISTAT and the way my country (on purpose) make difficult to access any data that could give everybody a clear understanding of our current situation (and responsibilities, of course).
In case you want to write an article on that, or any other aspect related to my country, as seen from "outside", I will be glad to publish it on my blog, «L'Indipendente». All the contibutors are Italian, and a different point of view might be worth. Of course, I publish also English articles. Please, just consider it an invitation. Feel free to say no if you have no time.
Thank you in any case for your prompt and interesting reply.
I appreciate that.
I am a regular reader of this blog.
I found one of Dario's quotes to be very interesting...
"...honest but critical analysis of ISTAT and the way my country (on purpose) make difficult to access any data that could give everybody a clear understanding of our current situation (and responsibilities, of course)..."
I have been dealing with this problem for several years now, and it does not matter if I am in the country or out of the country (I am currently out), I still find it hard to get a handle on what is really going on - despite available data (by the way, Uruguay is worse).
So, I go by my intuition. My intuition from my most recent trip to Milano (last month), was that despite official statistics pointing to that area as being a bastion of European low unemployment (3.5% or similar), I would have to say that the situation was very negative in my view... one of the worst 3.5% unemployment economies I have ever seen.
Right now, I am in the Chicago area, and we are in an economic slowdown. Milano is always held up by the Milanese as an economy that performs with the best of Western regional urban economies. I just don't see it when I am there, and I'll put my money on Chicago's dynamism over Milano anyday of the week, despite the slowdown and the low dollar.
It's too bad, because Italy is full of potential, but I dislike it when people blame the problems on the power brokers there. It's everyone's fault, and after spending a lot of time in the US over the years, I am convinced the Italian people can take personal initiative and responsibility and change the system if they want to - but they just choose not to. They remind me of spoiled children when I am there. So, I decide to stay out of the country for now.
I hate to say it, but one could say Buenos Aires, Argentina offers a better future for young professional Italians than Italy itself.
P.A. said «...I dislike it when people blame the problems on the power brokers there. It's everyone's fault...»
Well, I cannot debate about the fact that citizens have the government it served them right. However the Italian situation is quite peculiar. In the last few years, "Casta" passed several laws to prevent a serious change even from active and willing people. For example, they took us the possibility to specify who should be elected in the parlament. I cannot say anymore to a candidate, I want that you be my candidate. I can only vote a party and the party decide who should go to the Parlament. In the parlament, however, the member has NO power at all. He or she is not allowed to vote laws according to his/her opinion. They MUST comply to party decisions, and party decisions are based on agreements between majority and opposition. In most of cases laws are designed to protect interests of lobbies in a way that we cannot change.
This is the real problem. We have no REAL power, as it should be in a democracy, to change our politicians. We can only select the balancing of power within the Casta itself. It is practically impossible, today, for a citizen, to candidate. There are mechanism that prevents anybody to enter in plitics (unless VERY rich).
In Rome there are sit-in and protest every day. They are completey ignored. There are laws who violate Constitution, but the mechanism is such that a citizen or a group of citizens CANNOT request a change.
You must know all the mecanisms, to understand. By the way, if you can read Italian, please, give a look at this series of articles that a member of Italian Parliament published on my blog:
Papponi di Stato.
Grazie Dario,
Conosco il blog Papponi di stato. Questo blog mi piace. L'ho scoperto per casualità.
I believe that I was not clear enough in my previous message.
I can easily make the argument that the States (I am a dual US-Italian citizen) has many of the same problems in democracy as Italy. The difference is how people here tend to react against the adverse system.
Many here have accepted that democracy is not the only solution. In addition to politicising through official attempts to effectuate change through the public sector, alot of ground can be covered through the private sector. The majority of people here use the private sector for their little revolutions. They don't wait for democracy to solve their problems.
Therefore, when I am in Italy, I see the same potential for private sector revolution, but the attitude of the most Italian people between the ages of 25-45 (forget those older) is inertia, anti-proactivity, stagnation, hopelessness. Only when the collective attitude evolves will Italy have the energy to change. Since democracy as it stands in Italy renders change quasi-impossible, people have to empower themselves.
Using the private sector as an alternative mechanism for change is obviously not a perfect system here in the States, but it is what keeps many of us sane.
I understand your point, and I agree that it is a peculiar attitude of Italian people to expect that problems are solved by institutions rather than react and try a change themselves. However you have also to consider a strong difference between the USA and Italian society. USA is *already* strongly oriented to private initiatives. If you havea good idea, it is quite easy to find someone who found you (the idea must be really good, anyway, and you must be able to sell it very well). In Italy it si mostly impossible. Does not matter how good is the idea, unless you have political links or you are already rich, you have no chances. This is the country of NO-OPPORTUNITIES. The governement is NOT facilitating entrepreneurial initiatives at all. On the other hand, banks and big companies with political contacts can obtain million euro to sustain not robust initiatives. Where money goes, nobody knows. There are thousands laws to obstacle any private initiatives: it si a way to control people. Do you know that I cannot even make a small change in my house (not related to the structure) without a very complicated and bureaucratic process that may cost for taxes more than the cost of change itself? Opening a shop, starting an initiative in the web, making business is strongly hindered by a bunch of rules whose only purpose is to facilitate only those one who are members of a lobby. So, what you say it is true in theory, but in Italy is practically impossible to do. All the funding that in theory are planned to support new companiews and new ideas are really distributed to "friends" and"political supporters". That the real world.
Grazie, Dario, per la sua risposta.
Despite the deeply negative situation, you cannot give up and abandon the dream to effectuate change individually. You have to fight for it and never stop.
It may sound like a naïvely ignorant idea, but say you have a network of 20 very educated unemployed individuals in Italy - yet with no political or business connections. Each one can form their own company quite easily now with the recent law changes - just make sure that you have at least one accountant and attorney in the group. You now have an association of 20 that behaves like a company, yet in reality is made up of 20 separate companies. The accountant keeps track of all billable charges, and lawyer, who is hopefully a tax expert as well (if not, bring one in) will make sure the service contracts between association members are optmimized to benefit the nature of the relationship. You obviously will have to avoid paying too much in taxes, and there will be a temptation to evade taxes, but it can be mimimized legally, just need a tax lawyer.
Voilà, you have just effectuated structural change. Strength in numbers counts. Develop a network of knowledge workers, bypass the regulatory system, work together to achieve a common goal.
It's far from a perfect idea - but it could work in Italy. The trick would be to develop the network. That's obviously easier said than done. You just have to find Italians who have hope - extremely difficult - but not impossible.
Hi you two.
Just to say how much I have enjoyed reading your exchange. I think this kind of dialogue needs to go on much more in Italy, especially among young people.
Temperamentally I tend to agree with Piazza Armerina, but I also understand why Dario thinks what he does.
I also saw the film La Febbre (and wrote a blog post on it) by Alessandro D'Alatri, which showed some of the institutional type difficulties people can face when they try to break out and do something on their own behalf.
Of course it is also easier to take new inititaives when the general economic outlook is favourable, which of course it isn't at the moment.
The difficulty with Italy's problems is that they are not dramatic, they are endemic and ongoing. So it is much more difficult to generate a "lets all work together" to get out of this mentality.
Here in Spain the economic slowdown is now quite dramatic. The Spanish economy may well seriously "crash". But for precisely this reason there may then be a strong reaction in a year or two (Spain still moves fairly slowly, this is not the US either). It is also interesting to see how here the tone of political debate has softened a lot as we enetered the crisis. This is another big difference between Spain and Italy I would say.
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