Italy Business Confidence Rises to Eight-Month High

By Lorenzo Totaro

July 29 (Bloomberg) -- Italian business confidence rose to an eight-month high in July as manufacturers expect exports to pick up and help lead the economy out of its deepest recession since World War II.

The Isae Institute’s sentiment index climbed for a fourth month to 71.7 from a revised 69.8 in June, the Rome-based research center said today. The July reading topped the median forecast of 70 in a Bloomberg News survey of 17 economists.

“Italian industrialists have hope that the production cycle will gain some momentum in the coming quarters,” said Annalisa Piazza, an economist at Newedge Group in London. The reading “confirms that the bottom of the ongoing recession has been reached earlier this year.”

Industrial production, buoyed by government incentives to buy cars and home appliances, rebounded in April after 11 months of contraction and was unchanged in May. June output rose 0.5 percent, employers lobby Confindustria forecasts. Exports to European Union countries gained 0.4 percent in May on a monthly basis, compared with a fall of 4.2 percent in April.

Italian businesses “expect a recovery in new orders and an increased level of exports in the next few months,” today’s report said. “Companies perceive an improvement in their competitive position on the domestic and foreign markets.”

Reversal of Fortune

Today’s reading mirrors advances this month in consumer confidence, where optimism among Italian households rose to the highest in almost two years. In Germany, Europe’s largest economy, confidence increased for a third month. Rising exports will help Italy record in the three months through September its first quarterly growth since early last year, Isae forecast on July 23.

European car sales rose in June for the first time in 14 months as government-backed incentives boosted demand for producers such as Fiat SpA. The Italian carmaker recorded a 12 percent gain, selling 112,437 vehicles in the region.

Indesit Company SpA, Europe’s third-largest home-appliance maker, said this month it would continue production at a plant near Turin, after having announced in April that it would reduce output at the facility.

Europe’s worst recession since World War II has led to falling prices and record-low interest rates that lowered financing costs. Italy’s producer prices declined 0.2 percent in May, the 10th consecutive monthly fall, leaving manufacturers with more money to spend.

Isae conducted its latest survey of 4,000 companies between July 1 and July 20. The June figure was revised up from 69.3.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net