Consumer confidence in Italy fell to its lowest level in more than a decade in May as Italians worried about the conflict in Iraq and the sluggish economy's impact on their jobs and savings. The mood of consumers had brightened slightly in April, but the data released on Thursday raised concerns that the euro zone's third largest economy would not be able to sustain the unexpected growth posted in the first quarter of 2004. Research group ISAE said its core confidence index, which strips out seasonal and other variations, slipped to 98.6 from a revised 100.3 in April. Last month, ISAE had reported the April core index at 101.6. "Particularly worse are short-term expectations and the view of the general economic situation of the country, probably influenced negatively by the worsening of the international political-military situation," ISAE said in a monthly report.
May's reading was the lowest since December 1993, ISAE said. "I expected a low figure but this is very weak. Clearly the crisis situation in Iraq has had an impact," said Luigi Speranza, an economist with BNP Paribas. Marco Valli with brokerage UBM in Milan said the loss of confidence probably meant growth in the second quarter would fail to match the 0.4 percent achieved in the first three months of the year. But Carmen Nuzzo from Citigroup said the index often proved to be out of synch with the economy and said the average for April and May were in line with the first quarter. The seasonally adjusted index for the current economic climate fell to 97.1 -- its lowest level since November 1993 -- from a revised 101.6 in April. The outlook for the future index fell sharply to 94.4 from 101.5. In its consumer confidence report, ISAE said Italians were increasingly worried about the labour market and their ability to increase their savings. The only positive reading related to more stable prices.
ISAE, an autonomous body overseen by the Treasury, conducted interviews with 2,000 people between May 3 and 14. Economists also pointed to a fall in the willingness of Italians to invest, which slipped slightly from April to touch its lowest level since September 2001 when the hijacked aircraft attacks on the United States hammered financial markets around the world. ISAE said in its report the reluctance to invest was probably linked to "recent financial scandals." Italian dairy multinational Parmalat slumped into insolvency late last year, the latest of a series of corporate disasters in Italy to hurt investors.///