Italian Consumer Confidence Rebounds From 15-Year Low

By Steve Scherer

Aug. 27 (Bloomberg) -- Italian consumer confidence bounced back from a 15-year low in August as oil prices fell from record highs and expectations for economic growth improved.

The Rome-based Isae Institute's index, calculated from a survey of 2,000 families, rose to 99.5 from 95.8 last month. Economists had expected an increase to 96.4, according to the median of 12 forecasts collected by Bloomberg.

Oil prices have receded 21 percent from a record $147.27 a barrel reached on July 11, prompting gasoline prices to decline as Italians embarked on their traditional summer vacations. Italy's economy, Europe's fourth-biggest, will expand less than the rest of the world's advanced economies this year, the International Monetary Fund forecast last month.

``This is a rebound, but it's doubtful that it signals a real turnaround,'' said Marco Valli, an economist with UniCredit Group in Milan. ``The strong fall in oil prices clearly helped confidence, which had collapsed in recent months.''

Italians were less worried about inflation over the next year than they were a month ago, the Isae report said. An index measuring expectations for higher prices in coming months fell to 19 from 25 in July.

``Judgments and forecasts regarding the economic situation of the country showed substantial signs of improvement after July's decline,'' Isae said.

Economy Contracts

An index measuring concern about the current economic situation rose to minus 128 from minus 136, while another gauging the short-term outlook rose to minus 46 from minus 55. Concern about unemployment fell to 56 from 59, according to the survey.

The rebound may be short lived. Italy's economy unexpectedly shrank in the second quarter, according to an Aug. 8 report, edging it closer to the fourth recession in a decade as households and businesses struggle to cope with more expensive energy costs. Italy's inflation rate held at its highest in more than six years in July as food and gasoline costs rose, crimping household spending power.

Italy's economy will expand 0.5 percent this year and the next, the slowest among the world's advanced economies, the IMF said in July. Growth has trailed the European Union average for more than a decade.

Earnings Suffer

Falling consumer spending is hurting the bottom line at some companies. Bulgari SpA, the world's third-largest jeweler, lowered its forecasts for sales and profit this year after saying earlier this month that net income dropped in the second quarter due to declining demand.

The gain in Italian confidence contrasts with growing pessimism among other Europeans. German consumer confidence slumped to the lowest level in five years, Nuremberg-based market research company GfK AG said yesterday.

To fight inflation, the European Central Bank raised its benchmark interest rate on July 3 by 25 basis points to 4.25 percent. The move will raise borrowing costs for anyone seeking a mortgage to buy a home and could further slow economic growth.

The Isae survey was conducted between Aug. 1 and Aug. 20.

To contact the reporter on this story: Steve Scherer in Rome at sscherer@bloomberg.net