Prices in Italy rose 4.7% in April, a surprising jump for a slow growing economy where wages are falling and unemployment is on the rise.
According to the figures released Monday by Italian National Statistic Institute Istat, most of the rise came from a staggering 20.8% rise in gasoline prices and agricultural products, transport, and tobacco products also saw prices climb. Istat said it was the largest 1 month increases in prices in Italy since Y 2008.
The news comes amid other indicators that would seem to indicate prices should fall, including eroding consumer confidence, predictions that the Italian economy will contract this year, and an official jobless rate that swelled to 9.7%, according to Istat report Monday.
Usually, those trends would trigger an easing of demand and a corresponding drop in prices. But in Italy, the opposite happened, though economists differ on the causes, with some citing increased taxes connected to government austerity measures and others citing temporary factors, like a rise in world oil prices, a cold spring that has hurt domestic agricultural production, and the need for retailers to rebuild stocks of goods.
This is not a trend, it is a combination of temporary factors combined with shoddy formulas that magnifies these temporary circumstances, said University of Turin economist Mario Deaglio.
Regardless of the causes behind the rising prices, the news is not positive for beleaguered Italian consumers already reeling from the economy's anemic growth and the government's austerity plans, which have reduced government services, increased the country's tax burden, and cracked down on tax evasion.
Consumer confidence has fallen now for three consecutive surveys and it rests at its lowest levels in 16 years. The Rome-based polling organization Opinioni reports that nearly 2 in 3 Italians believe the country's economic circumstances will be weaker in 1 yr than it is today.
Overall consumer sentiment is bad and getting worse, Opinioni co-director Maria Rossi said.
But there is good news from at least one corner of the Italian economy: Milan, the country's 2nd largest city, which released information Monday indicating that the home of the Italian Stock Exchange and most of the country's largest banks and insurance companies, is thriving, at least in comparison to the rest of the economy.
The Milan Chamber of Commerce reported that the city's economy had created nearly 13,000 new jobs in the last Quarter, mostly in service industries, and that unemployment levels in the Metro Area is just 5.8%, nearly 4 pts below the national average.
But even in Milan, consumer sentiment is suffering: Opinioni reports that around 60% of the residents in Lombardy, the region that includes Milan, believe the country's economy will get worse before it gets better, only slightly more optimistic than the country as a whole.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.