Rome, Feb. 20 (Bloomberg) -- Optimism among Italian consumers, whose spending makes up two thirds of Europe's fourth- biggest economy, remained near its lowest in more than six years because of concern over job security and a possible war. An index based on a survey of 2,000 households by the state- funded Isae institute rose to 107.7 from 106.2 last month, the lowest in more than six years. The poll is one of the first monthly gauges of European consumer confidence. ``We are very worried; things are going badly,'' said Marco Venturi, president of Italy's Confesercenti, which represents about 50,000 hotels and tour operators. ``There is nothing like the advent of an armed conflict to put people off spending. This year could be worse than 2002.'' Some of Europe's biggest employers, ranging from Fiat SpA to Germany's Siemens AG, are slashing jobs and the region's $7 trillion economy may shrink in the first quarter, the European Commission said. The looming prospect of a U.S.-led war with Iraq may also delay a rebound in Italy and its biggest trading partners, France and Germany.
Even post-Christmas sales failed to boost confidence and spending.
``This year was a disaster; people dropped in, had a look around and walked out,'' said Maria Estela Soares De Silva, a 32- year-old shop keeper at Blue Sand clothes boutique in central Rome. ``We've offered 70 percent discounts and extended the sales period but nothing seems to work.''
Job Cuts
Italy's economy probably grew at its slowest pace in nine years in 2002. Germany likely contracted in the fourth quarter, bringing Europe's largest economy closer to a recession. Consumer confidence in France has slumped to a five-year low. The three countries make up about three-quarters of the gross domestic product of the nations sharing the euro. Since the start of the year a spate of Italian companies have announced job cuts. Assicurazioni Generali SpA, the country's biggest insurer and Sanpaolo IMI SpA, Italy's No. 2 bank, will shed almost 5,000 jobs. Those cuts come as Fiat and Pirelli are shedding as many as 10,000 jobs. Unemployment had been coming down in Italy thanks to more flexible rules for part-time and temporary hiring. Even with the announced firings, Italians think the worst may be over, Isae said in the report. The percentage of those surveyed who expect an increase in joblessness fell to 40 percent from 44 percent, Isae said. Italy's unemployment rate is 8.9 percent, the third-highest among the Group of Seven industrialized nations.
U.S. Recovery
A turnaround in Italy may hinge on an economic revival in the U.S., which accounts for about 10 percent of Italy's exports. The possibility of war with Iraq and concern about terrorism is also making U.S. shoppers more cautious, restraining business investment and hurting the economy, which grew 2.4 percent last year. The University of Michigan said last week its initial index of consumer sentiment in February fell to a nine-year low. U.S. President George W. Bush has said he is willing to lead an attack against Iraq, even without authorization from the UN Security Council, to force President Saddam Hussein to abide by UN demands he give up arms of mass destruction. UN weapons inspectors are currently in Iraq to seek and dismantle chemical, biological and other weapons. ``Each day a war seems more and more probable,'' said Attilio Pasetto, an economist at Capitalia SpA. ``Add to this existing worries about unemployment and inflation and we have trouble.''
War Protests
More than 1.5 million Italians demonstrated in Rome on Feb. 15 against a war with Iraq, the biggest of the dozens of protests held around the world that day. More than two-thirds of Italians say that Iraq shouldn't be attacked even if the United Nations authorizes the use of force, according to an Ispo/Telesurvey poll published in Corriere della Sera newspaper last week. Today's confidence report indicated that concern among Italians about rising consumer prices may be starting to ease more than a year after the introduction of euro notes and coins. The switch to the new currency prompted protests by consumer groups who said retailers had rounded up prices. The country's inflation rate in January held for a third month at 2.8 percent and has remained above the European Central Bank's 2 percent limit for the past three years. The number of Italians who think prices are ``rising a lot'' fell to 87 percent from 90 percent. //www.quote.bloomberg.com