- Ignazio Visco, Governor of Bank of Italy
Whereas Europe starting to see a light at the end of the tunnel that lasted for 18 months, during which the economy was living through its worst recession ever, one of its major members is still struggling to build up steam. On Thursday the National Institute of Statistics said Italian retail sales plunged 0.3% in July, down from a 0.2% drop in June and well below analysts' expectations for a 0.1% contraction. On an annual basis, sales at Italian retailers plummeted 0.9% over the corresponding period. And even though consumer prices accelerated 0.4% in August, it is a result of opposite movements, such as slowdown in the annual growth in prices of food and non-alcoholic beverages and communication. Earlier this month, Italian authorities lowered their growth forecast, saying the economy is expected to shrink 1.7% this year compared with a previous estimate of a 1.3% drop. Regarding the next year, growth is seen at 1.0%, 0.4% lower than expected earlier. Furthermore, the number of industrial orders dropped 0.7% in the middle of summer, marking gloomy prospects for Italian manufacturers. While the economy is not showing any signs of stabilization, the nation's government is throwing wood on the fire. Hence, Italian president Giorgio Napolitano will not attend the political conference due to a disturbing political development. As a reaction of growing political confusion over the country's fragile coalition Italian benchmark FTSE MiB Index plunged 1.8%, while yield's on Italian 10-year government bonds advanced 80 basis points, hitting 4.46%.
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