| BUSINESSWEEK ONLINE : NOVEMBER 1, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| BUSINESS OUTLOOK
Italy: Still the Caboose on the Euro Train The weakest of the euro 11 is looking a bit healthier. Nevertheless, Italy remains the laggard in the euro zone--just less so. The progress seems to have taken hold in the third quarter, especially in Italy's industrial sector. Factory orders and sales rose in July, and industrial production increased a better-than-expected 1% in August, or 2.6% from a year ago (chart). Then in September, the purchasing managers' index rose to a strong reading of 57.3%. The improvement in manufacturing is the result of healthy export demand and the need to rebuild inventories. Italy's consumer sector, though, is still sluggish. July retail sales were up only 1.3% from a year ago, less than expected. Consumer confidence fell back from 118.7 in August to 115.8 in September, a four-month low. A large 45% of consumers expect a rise in unemployment over the next year, and only 17% expect their financial positions to improve. The jitters over job prospects run counter to the downtrend in Italy's jobless rate. The July rate held at a four-year low of 11.5%. The pickup in industrial activity suggests that Italy's real gross domestic product will grow at a healthy clip in the second half. In the second quarter, real GDP increased at a 1.7% annual rate, with gains in construction, exports, and some business investments. For now, the government is sticking with a growth forecast of 1.3% this year, though some private economists think that's optimistic, and even Prime Minister Massimo D'Alema views the forecast as uncertain. Strong economic growth is necessary, though, in order for Rome to meet its deficit-cutting objectives over the next few years. The latest budget plans, outlined on Sept. 30 by the D'Alema government, call for spending cuts of 11 trillion lire ($6 billion), and the Treasury said it expects the yearly federal deficit to drop to just 1.5% of GDP next year. While that is an improvement from the 1999 level of 2.2% to 2.5%, Italy's deficit, like its economic performance, remains the most dismal among euro zone members. By JAMES C. COOPER & KATHLEEN MADIGAN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Italy: Still the Caboose on the Euro Train CHART: Manufacturing Is Rebounding in Italy INTERACT E-Mail to Business Week Online | |||
