After producing more recessions then pizzas in recent years, and with the economic situation in Europe being what it is, it comes as little surprise that optimism in Italy has slumped. But this latest drop in business confidence is more severe than expected.
In the eleven years since 2001 Italy has gone through four recessions. In spite of recent hints that the current recession could be easing – such as the unexpected increase in industrial output for August and heightened consumer confidence – over a decade of tough times has been enough to put a real dent in business sector optimism.
Italy’s present recession began in the final quarter of last year and was triggered by the tax hikes and spending cuts imposed by the government in an attempt to counter the effects of the Eurozone crisis. Now, twelve months on, manufacturing sentiment has dropped from 88.3 to 87.6.
This figure was supplied by the Istat, the national statistics institute based in Rome and was significantly lower than economists forecast reading of 88.7.
The Italian government under Prime Minister Mario Monti initially estimated that the economy would shrink by 1.2 per cent by the end of 2012. This prediction has since been negatively revised and now falls in line with the estimate of 2.4 per cent contraction supplied by the International Monetary Fund.
Despite this, and the fact that contraction is also expected in 2013, the Bank of Italy is holding fast to its expectation that Italy will escape from recession next year.
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