Italian business confidence jumped more than expected in December to its highest level in 18 months due to a rise in production expectations and an improvement in orders, but economists said the recovery may slow next year. Economic research institute ISAE said on Tuesday its seasonally adjusted business morale index rose to 82.6 from a revised 79.4 in November.
Last month's figure was raised from an original 78.8. The index comfortably topped all the forecasts in a Reuters survey of 14 analysts, which had pointed on average to a rise to 79.5. The Italian data followed rising business confidence data from Germany and Belgium in recent days, suggesting the euro zone was consolidating its recovery.
"It's a very encouraging figure which confirms the recovery in the industrial sector we have seen in recent months," said Davide Stroppa of Unicredit. He cautioned, however, that Italy's fourth quarter industrial production figures could prove disappointing after a strong rise in the third quarter caused by one-off stimulus.
Italy, the euro zone's third largest economy, clambered out of recession with a 0.6 percent rise in gross domestic product in the third quarter, ending its worst downturn since World War Two. Italy's government forecasts GDP will contract 4.8 percent this year after a 1.0 percent fall in 2008, and grow a modest 0.7 percent in 2010. Inventory levels in Italy's manufacturing sector remained stable, the ISAE survey said, but expectations for future production improved sharply, with the ISAE sub-index rising to 8 from 4 in November. Order levels also improved, with the sub-index rising to -40 from -47 in November. Foreign demand was particularly strong, ISAE said.
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