BUSINESSWEEK ONLINE : JULY 31, 2000 ISSUE
BUSINESS OUTLOOK Italy: A Strong Push from a Weak Euro Growth, especially among manufacturers, is picking up in Italy, the euro zone's fourth-largest economy. And the weak euro as well as high optimism should give the economy needed momentum through the second half. Real gross domestic product grew a larger-than-expected 1% in the first quarter, after a disappointing 0.4% rise in the fourth. The winter gain bolstered the government's forecast that real GDP will grow 2.8% for all of 2000. Private economists are increasing their forecasts to show growth above 2.8% this year, after real GDP grew 1.4% in 1999. In particular, Italian industry is doing quite well, helped by rising exports. Industrial production in May jumped 2.2% from April, or a solid 6.7% above its year-ago levels. Capital and consumer goods powered the increase. More important, business executives expect the good times to continue. The business confidence indicator rose from 107 in April to 111 in May, a record high (chart). The indexes covering orders and production expectations both hit three-year peaks. Manufacturers are busy because of foreign sales. Exports for the first four months of 2000 were up a steep 15.3% above the same period of 1999. The euro's 9% decline vs. the dollar so far this year is helping Italian exports. Foreign customers are taking up some of the slack in domestic spending. Italy's labor markets remain one of the weakest in the euro zone. The jobless rate in April rose to 11.7%, from 11.1% in January. The euro zone averaged 9.2% in the month. Car registrations are weakening, and other retail buying is also slowing. Italians are worrying about inflation again, however, thanks mostly to surging energy prices. The producer price index jumped 0.9% in May from April, lifted by higher electricity and oil costs. Italy's consumer prices in June were up 2.7% from a year ago, well above the European Central Bank's 2% target. A growing fear about inflation in the euro zone in general is why investors are still not discounting another rate hike by the ECB this year. By JAMES C. COOPER & KATHLEEN MADIGAN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Italy: A Strong Push from a Weak Euro CHART: Business Spirits Rise to New Heights INTERACT E-Mail to Business Week Online

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