August 29, 2013 / 12:31 PM / 4 years ago

Italian confidence rises as recovery beckons

ROME (Reuters) - Italian consumer and business morale rose more than expected in August, a sign that the euro zone’s third-biggest economy may be heading toward a recovery from its longest recession in six decades.

Italian Prime Minister Enrico Letta gestures during a news conference at the end of a cabinet meeting at Chigi palace in Rome August 28, 2013. REUTERS/Tony Gentile

Both surveys posted their best results since just after the slump began in mid-2011, with consumers saying they expected the economy to improve in coming months and manufacturers reporting a slight rebound in orders and inventories.

The surveys’ publication coincided with the resolution of a long-running dispute in Prime Minister Enrico Letta’s fragile coalition government, which agreed to scrap an unpopular housing tax this year and work on replacing it with a municipal services levy from 2014.

National statistics office ISTAT said its seasonally adjusted manufacturers’ confidence index rose to 92.9 in August from 91.8 a month earlier. Consumer confidence rose to 98.3 from 97.4. A Reuters survey had pointed to an increase in the business index to 92.5, and a consumer gain to 97.8.

“The surveys confirm our expectations for a return to growth in the fourth quarter,” said Paolo Mameli, a senior economist for Intesa Sanpaolo in Milan.

“The government has taken a less restrictive policy stance than had been expected a few months ago. There are signs of a recovery in households’ real disposable income, which is a fundamental factor for morale.”

But he added: “Political stability is a necessary condition, alongside a global comeback, for an economic recovery.”

Both surveys are still at historically low levels and unemployment rose to a record high of 12.2 percent in June, reminders that Italy remains one of the most sluggish euro zone economies. While the bloc as a whole emerged from recession in the second quarter, Italy posted its eighth consecutive quarter of contraction.

ISTAT’s composite index of business sentiment, which combines surveys of manufacturing, retail, construction and services, also rose in August, to 82.2 from 79.8 in July.

Reporting by Steve Scherer; Editing by Ruth Pitchford

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