Italy Retail PMI March 2008

Well there aren't too many words in my vocabulary to describe this one. Italian retail sales fell through the floor in March - at least according to the Bloomberg NTC Purchasing Managers Index - and fell at the fastest pace in four years as national elections next month added to concern about the economic outlook.

The seasonally adjusted index of retail sales declined to 36.4 from 43.8 in February, according to a survey of 440 executives compiled for Bloomberg LP by NTC Economics Ltd. That's the lowest - as the most rapid rate of contraction - since the survey began in January 2004. The reading has now been below 50, the level that signals a contraction in sales, since February 2007.




Hiring by retailers fell in March for a third month according to the survey, and purchase-price inflation accelerated for a second month to a five-month high, ``with oil-related items and foodstuffs'' leading the gains.

Elsewhere in Europe, retailers are also struggling to rekindle demand. European retail sales fell in March as sales growth slowed in Germany and France, the euro area's two largest economies, according to NTC.

For the Bloomberg retail indicator, NTC compiled a representative panel of retail companies in Germany, France and Italy, which together make up 80 percent of total euro-region retail sales by value. The panel includes large, chain retailers as well as smaller stores.

On another front there are some signs that the coming elections may not produce the kind of decisive outcome many Italians were hoping for, at least according to this story in ANSA.

At the end of his post on the fall of the Prodi government my colleague Manuel Alvarez noted that "[...] it's quite possible that Italy will head to the polls later this year under the existing electoral system - with its well-known shortcomings - and that the government that emerges from that election may eventually find itself in a predicament similar to that of Prodi's outgoing cabinet."

Well this is precisely what seems to have happened, at least according to the ANSA report. As Manuel noted in a mail to me this morning:

"Of course, if that happens, Silvio Berlusconi will have no one to blame but himself: he wanted an early election under the current system, and he got it - but once again, his scheme may not entirely work out the way he expected. We shall see..."

Italian Business Confidence March 2008

Italian business confidence declined to its lowest level in two and a half years in March as slowing economic growth and the euro's appreciation continued to weigh on orders and optimism. The Isae Institute's business confidence index fell to 89, the lowest since August 2005, from a revised 89.6 in February, the Rome-based research center said today.




A sub-index measuring Italian manufacturers' total orders fell to minus 16 from minus 13, according to today's report. Exporters are more pessimistic about their short-term sales outlook, with an index falling to 5 from 9 last month, according to a quarterly survey of exporters also released today.

``The fall in confidence is due above all to the contraction in orders,'' Isae said. ``In the first quarter of 2008, both current exports and the outlook for exports worsened.''

These factors prompted manufacturers to grow more pessimistic about Italy's economy in the coming months, according to a seasonally adjusted sub-index that fell to minus 30 from minus 24 in February, according to Isae.

Italian Consumer Confidence March 2008

Italian consumer confidence fell to its lowest in nearly four years in March as rising prices and slowing economic growth increased pessimism among growing numbers of Italians. The Rome-based Isae Institute's index, based on a survey of 2,000 families, fell to 99 from a revised 102.8 in February. This reading is the lowest since May 2004.

Italians have been steadily cutting back on their spending, which makes up two-thirds of the economy, as the continuing rise in the cost of food and transportation reduces their disposable income. ISAE predicts the Italian economy will grow by as little as 0.5 percent this year, the slowest pace since 2003.




The sub component concerning optimism about the current economic situation fell to a 14-year low of minus 132 from minus 118, ISAE said. The number of Italians who are ``very concerned'' about rising prices is at a four-year high.


Obviously overhanging the whole economic climate is the current election campaign, which was triggered by the collapse of Prime Minister Romano Prodi's government in January after 20 months in power. Both leading candidates, two-time premier Silvio Berlusconi and former Rome Mayor Walter Veltroni, are promising tax cuts to help revive growth, although given the large fiscal constraints that this growth slowdown will present, it is far from clear where any of these will come from.