Italys consumer morale falls as job fears grow

Italian consumer morale dropped a lot more than expected in March, with concern about job security higher than at any time in the last 15 years and analysts saying the public finally seemed to grasp the severity of the crisis. Research institute ISAEs seasonally-adjusted consumer confidence index, released on Wednesday, fell to 99.8 from a revised 104 in February.
Taking it back to end-2008 levels after two months of gains driven by the slowdown in inflation. The March index was below all forecasts in a Reuters survey of 21 analysts, which pointed to a slight fall to 103. Forecasts spanned 101.5 to 104.0. "So far we had seen Italy moving differently from the rest of the euro zone. Now Italy too could start to converge towards the more depressed European figures," said Unicredit MIB analyst Marco Valli.
The view of the current economic situation and the future outlook deteriorated but more dramatic was the pessimism about short-term prospects for rising unemployment, which hit its highest level since February 1994. Consumers had remained surprisingly perky in January and February with the recession not yet producing large-scale job losses and lower inflation benefiting many families.
ISAE said the slowdown in inflation was expected to continue "but its positive influence on the durable goods market and on savings has been partially interrupted". "It looks like the boost to confidence from the sharp drop in inflation has run out," said Valli. "I expect the index to keep falling in coming months in line with similar data from other euro zone countries." Overall, the confidence index remains below its long-term average of around 113 and the surprise rises in the last two months came against a background of bleak economic news.
Growth is forecast to fall by at least 3 percent this year, giving Italy two consecutive years of contracting gross domestic product for the first time since World War Two. Carmela Pace, an economist at MPS Capital Services, said the index now reflected Italys dire economic data and the prospects of tumbling growth and rising unemployment. ISAE said the biggest drop was the current economic climate sub-index, to 62.1 from Februarys 70.4. The future economic outlook sub-index fell to 85.3 from 90.7 and views on personal finances dropped more modestly to 118.3 from 120.7.