Bloomberg News

Italian Business Confidence Fell in June on Growth Concerns

June 28, 2011

June 28 (Bloomberg) -- Business confidence in Italy declined in June to the lowest in eight months as executives became concerned about the growth outlook in the euro region’s third-biggest economy.

The manufacturing-sentiment index declined to 100.5 from a revised 101.1 in May, national statistics institute Istat said in Rome today. Economists predicted a reading of 101, according to the median of 13 estimates in a Bloomberg News survey. Istat originally reported a reading of 101.3 for May.

Employers’ association Confindustria lowered its growth forecast this month, urging Prime Minister Silvio Berlusconi’s government to implement reforms and contain spending. The economy will expand 0.9 percent this year and 1.1 percent next, less than the 1.1 percent and 1.3 percent estimated in December 2010, Confindustria said. The new forecasts assume “credible reforms,” including of the tax system, it added.

Italy’s weak competitiveness and slow recovery from its worst slump since World War II mean the $2.3 trillion economy will lag behind euro-area growth this year, the International Monetary Fund said on June 17. As exports failed to offset weak consumer spending, gross domestic product grew 0.1 percent in the first quarter, the same as in the previous three months.

Moody’s Investors Service this month and Standard & Poor’s in May put the country’s credit ratings under review for a possible downgrade, citing growth challenges and saying government revenue and deficit targets may be not met. Italian 10-year bond yields yesterday reached the most relative to German bunds since the euro was introduced in 1999 amid concerns of a contagion from the Greek debt crisis.

Still, industrial production rose for a third month in April as exports underpinned output, and Confindustria expects a further increase in May. Italian new-car registrations expanded 3.6 percent last month on a yearly basis, while sales by Fiat SpA, Italy’s biggest manufacturer, dropped 0.9 percent, less than the 15 percent decrease in the previous month.

Consumer confidence declined in June as households turned pessimistic about the outlook for employment and economic growth, Istat said last week.

--Editors: Andrew Atkinson, Jeffrey Donovan

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net.

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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