Italian Consumer Confidence Unexpectedly Rose in September

By Flavia Krause-Jackson and Lorenzo Totaro

Sept. 23 (Bloomberg) -- Italian consumer confidence unexpectedly rose in September for a second consecutive month as oil prices dropped from record highs, leaving households with more to spend.

The Rome-based Isae Institute's index, calculated from a survey of 2,000 families, increased to 102.8 from a revised 99.6 last month. Economists had expected a decline to 98.4, according to the median of 18 forecasts collected by Bloomberg.

``The sharp rises in oil prices and inflation has been a major factor underlying the deterioration in consumer confidence,'' said Luigi Speranza, an economist with BNP Paribas in London. ``A rebound on lower oil prices will be at least partially offset by a worsening in the financial crisis.''

Italian families responded to higher oil prices and borrowing costs by cutting back on spending, sapping growth and leaving the country on the brink of its fourth recession in a decade. Crude has dropped 27 percent since reaching a record $147.27 a barrel July 11, giving relief to consumers faced with rising prices and interest rates at a seven-year high.


Households are less concerned that inflation will accelerate further, the Isae report said. An index measuring expectations for higher prices in the coming 12 months fell to 6 from 8. An index measuring the ability to set money aside rose to minus 63 from minus 80, Isae said.

Market Turmoil

Still, sentiment may sour in the coming months as the fallout from the turbulence in financial markets fuels concern that economic growth with slow further. The Italian economy will shrink 0.1 percent this year, its first contraction in 15 years, employers' association Confindustria said on Sept. 18.

Italian growth has lagged behind the European Union average for more than a decade, and the European Commission's forecast of a 0.1 percent expansion this year compares with a prediction of growth of 1 percent in France and 1.8 percent in Germany.

Those forecasts came out before the upheaval in world financial markets caused by the bankruptcy of Lehman Brothers Holdings Inc. Italy is among the Group of Seven economies trying to mitigate the worst financial crisis since the Great Depression. G-7 finance ministers yesterday said they would take ``whatever actions may be necessary'' as U.S. Treasury Secretary Henry Paulson put forward a $700 billion bailout plan for banks.

To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.netLorenzo Totaro at ltotaro@bloomberg.net.