It is hard not to draw the conclusion that Italy is now in recession.
"These figures, coupled with the manufacturing PMI, suggest Italy's economy has started to contract," said Chris Williamson, chief economist at NTC Research which compiles the data. "It's hard to see any silver lining and it doesn't seem the worst is over by any means," he said, forecasting Italian gross domestic product fell 0.1 percent in the first quarter.
The March PMI for Italian manufacturing fell to 49.4, again below the 50 threshold, the first time Italian industry has shown such a reading since June 2005; business confidence as measured by the ISAE institute also hit a 31-month low in March; and consumer confidence was the lowest since May 2004. In addition the seasonally adjusted PMI for retail sales collapsed to the staggeringly low level of36.4 in March from the already very weak level of 43.8 registered in February.
The PMI services survey that showed the sub-indexes for new and outstanding business both rose but remained below the 50 line while the employment and confidence components dropped.
"Business expectations remain the second weakest since September 11, 2001 and they are getting entrenched at this level," said Williamson. "They have never been so low for so long."
The European Commission has also now reported its eurozone “economic sentiment” indicator for March, with the composite number bouncing back a little from the February reading which its lowest level since December 2005. The indicator, which gauges optimism across all economic sectors and is regarded as a good guide to likely future trends, was back up to 102 after falling to 100.1 in February from 101.7 in January. As we can see in some of the counries shown in the chart below, the picture is a mixed one, with Germany for the time being holding reasonably stable, climbing back to 104 from 103.7 in February (France is also holding up fairly well at 105.6, from 105.2 in February), Ireland hovering, Italy continuing its steady downward path, and Spain continuing to head steadily off the map. The March reading in Spain was 83.9 which was down from 87.5 in February. I suppose here it is a case of how low can you go before you hit bottom. Yet awhile I suspect. So I guess in Italy there is at least some consolation: bad as you are, you are far at this point from being the worst case scenario. But this is not really much in the way of consolation. And especially not when we start to think about all those government debt financing issues which are looming just round the next corner.