Italy: consumer and business confidence rises in December

Positive news from the last data Istat, which show a improved confidence for both consumers and businesses. As of December 2022, the respective indices have increased for the second consecutive month, going up to 102.5 points (up from 98.1 in November) as regards consumers ea 107.8 points (from 106.5) for businesses.

Consumers: good economic climate and future, minus the family budget

All the series making up the consumer confidence index are improving except for judgments on the family budget.

The four indicators calculated monthly starting from the same components increase, albeit with different intensities, reflecting the variations recorded by the individual variables surveyed. Particularly, the economic climate and the future climate record the most decisive increases (respectively from 95.2 to 106.3 and from 102.8 to 108.2); personal and current climate increased to a lesser extent (in the order from 99.0 to 101.2 and from 94.9 to 98.6).

As reported by Istat, the increase in consumer confidence “is mainly due to a positive evolution of opinions on the country’s economic situation (including those on the unemployment); the variables concerning the personal situation show a more limited improvement.”

Enterprises: all sectors improve except manufacturing

With reference to businesses, the climate of confidence improves in all sectors with the exception of manufacturing. In more detail, market services and especially construction recorded the most marked increases (the index rose from 99.0 to 102.3 and from 151.9 to 156.6, respectively); in the retail trade a slight increase in the index is estimated (from 112.4 to 112.6) while in manufacturing confidence is worsening (the index goes from 102.5 to 101.4).

Considering the components of confidence climates calculated for each economic sector investigated, Istat underlines that “the increase in the index is mainly conveyed by judgments and expectations in improvement both in the services sector and in the construction sector.

More in detail, “in market services and construction all variables are improving. In the retail trade, assessments on sales are clearly improving while related expectations are decreasing; inventories are judged to have increased compared to last month. In the end, in the manufacturing sector all the components are worsening.”

Despite the overall improvement, the business confidence index remains at a level below the average for the period January-November 2022.

ING: “More optimistic consumers thanks to the labor market and tax support for families”

“In our opinion”, explains Paolo Pizzoli, Senior Economist of ING, “Two factors may explain the resilience of consumer confidence – back to May levels – regardless of the continued erosion of real disposable incomes caused by inflation.”

The first is “favorable development of the labor market, with an improving employment rate and a declining unemployment rate. While this is a possible side effect of supply and demand mismatch and unfavorable demographic developments, it is nonetheless positive in the short term.”

The second factor concerns “the fact that the Meloni’s government has given priority to continued fiscal support for families to overcome the shock of energy inflation, refinancing most of the measures until the end of March 2023 in the budget. It is interesting to note that, for the second consecutive month, consumers express a growing willingness to purchase durable goods.”

ING: “Surprising improvement in confidence in the services sector”

The commercial front, underlines Pizzoli, “appears more diversified, with more pessimistic manufacturers and more optimistic builders, retailers and, above all, service providers. The drop in confidence in the manufacturing sector, most marked among producers of capital and consumer goods, reflects the decrease in orders and the increase in inventories of finished products, consistently mirrored by the declining production plans.

“Italian industrythat continues to outperform its large eurozone competitors, it is apparently not immune to the recent unfavorable developments in global trade nor to the growing uncertainty about the risk of renewed supply chain problems related to the Covid developments in China.”

The biggest surprise, according to ING, comes instead “from fourth consecutive improvement in confidence in the services sector, despite an expected setback in the tourist component. The effect of the reopening seems to last longer than expected, with a possible impact on Q4 2022 GDP developments”.

For ING, possible stable reading of GDP in 4Q 2022

Overall, the release of the December confidence data could have positive repercussions on Q4 2022 GDP.

“We continue to believe that manufacturing will confirm a drag on supply-side growth in the quarter, but we recognize the possibility that services could perform better than expected,” says ING’s Pizzoli.

“The demand-side counterpart may experience a smaller negative correction in consumption than previously anticipated. Currently assume 0.2% QoQ GDP contraction in Q4 2022, but stable reading could be a real possibility.”