Italy Consumer Confidence Rises to Highest in 7 Years

By Lorenzo Totaro

Sept. 28 (Bloomberg) -- Consumer confidence in Italy rose in September to the highest in more than seven years as concerns about unemployment were offset by signs that the country’s worst recession in six decades is easing.

The Isae Institute’s consumer confidence index climbed to 113.6 from 111.8 in August, the Rome-based research center said today in an e-mailed statement. That was the highest since July 2002 and exceeded the median estimate of 112 by 15 economists surveyed by Bloomberg News.

“Expectations for the economic situation have turned into positive territory for the first time since the start of the recession,” said Annalisa Piazza, an economist at Newedge Group in London. “The main question is whether rising confidence will translate into higher spending near term.”

Consumer prices rose last month as Europe’s fourth-biggest economy started picking up after five quarters of contraction. Incentives to trade in old cars for less polluting ones helped boost auto registrations. Industrial production rose in July as Italy benefited from demand from France and Germany, its two biggest trading partners.

Today’s report mirrors the situation in those countries, the biggest economies of the euro region. German consumer confidence and French households’ optimism both rose in September, two separate reports showed on Sept. 25.

Short-Lived Recovery

While Italy’s economy may return to growth in the third and fourth quarter of 2009, the recovery may not last, said Marco Valli, an economist at UniCredit MIB in Milan.

“Italy’s growth acceleration will be short-lived and in early 2010 we should witness a renewed gross domestic product slowdown,” Valli wrote in a Sept. 24 report. This will be “driven by weakening exports and a setback in car sales following the expiration of government incentives.”

Sergio Marchionne, chief executive of carmaker Fiat SpA, said on Sept. 16 that it’s unclear whether incentives will continue in Italy next year. Finance Minister Giulio Tremonti, who has declined to say if they will be extended, said this week that European governments will decide jointly on the matter.

Government “subsidies to buy cars and a widespread perception of an economic pickup brought optimism among consumers,” Paolo Mameli, an economist at Intesa Sanpaolo in Milan said before the report. “Still, risks to unemployment and consumer spending are far from over.”

Labor Market

“Consumers are increasingly concerned about the labor market’s outlook and their expectations on the increase of unemployment are at the highest level since June,” Isae said in today’s report.

The country’s unemployment rate, which reached 7.4 percent in the second quarter, may exceed 10 percent in 2010 should the recovery remain weak, the Organization for Economic Cooperation and Development said in a Sept. 16 report.

Clothing maker Stefanel SpA will present a revised business plan next month after the economic crisis interrupted its efforts to turn the company around. “The second half started quite well,” Chairman Giuseppe Stefanel said last week in an interview. “It is still slow, and we need to work to do all that needs to be done for when there is a recovery.”

Isae conducted its confidence survey between Sept. 1 and Sept. 16.

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