Confirmation Friday that the
Italian economy is in recession added to the lengthening list of
economic woes that included new evidence of rising unemployment
and a significant threat of deflation.
National statistical agency Istat reported that the Italian
economy did fall by 0.2% in the second quarter, confirming
earlier estimates that the economy is in recession.
It also announced that the overall unemployment rate rose
by 0.3% to reach 12.6% last month while youth joblessness
unexpectedly slipped to 42.9%.
At the same time, the number of people employed in Italy
fell by 35,000 or the equivalent of more than 1,000 jobs per day
in July, said Istat.
Some 705,000 under-25s are looking for a job in Italy, the
statistics agency said.
The harsh economic news came just before Premier Matteo
Renzi met his cabinet to discuss several major policy reforms,
including measures the government hopes will help to strengthen
Italy's economic underpinnings.
Renzi's government, which must soon put together its 2015
budget, has been faced with a steady stream of bad economic
indicators that included a report Friday that for the first time
in more than 50 years, consumer prices fell below zero this
month.
Istat said that its consumer price index fell by 0.1% in
August, the first deflation report since September 1959 as fuel
prices fell by 1.2% to lead a downward trend in prices for food,
household products and personal care goods.
By European Union inflation measures, prices fell by 0.2%
in August.
Very low inflation is seen as a sign of significant
economic weakness that can translate into businesses losing
money, cutting costs, and eventually, reducing jobs.
The European Central Bank (ECB) aims to hold inflation just
under 2%, judging that to be the optimal level for economic
growth that is neither too fast nor too slow.
Istat also warned that it sees no improvement for the
economy in the months ahead, with gross domestic product (GDP)
remaining at about zero as Italy seems unable to pull itself
free from its third recession since 2008.
The latest report comes the same week as Istat said that
retail sales in Italy fell, along with consumer and business
confidence.
The gloom only adds to the fears of many Italians about the
economy in general and their own particular situations.
Italy is not alone in its woes.
Weakness in much of Europe, including its largest economy
Germany, has raised fears of stagnation and possibly deflation
in the region.
Some are even warning that Europe might be on the brink of
the sort of extended deflation that plagued Japan's economy for
10 long years.
The ECB is scheduled to meet on Thursday when President
Mario Draghi's words will be carefully scrutinized for further
hints on the possibility of a major asset-buying program, or
quantitative easing, to stimulate demand.
During an international event in Jackson Hole, Wyoming one
week ago, Draghi made headlines by urging eurozone countries to
keep reducing their deficits and keep up structural reforms.
He also said central bankers and policy makers had a role
in stimulating economic growth.
"It would be helpful for the overall stance of policy if
fiscal policy could play a greater role alongside monetary
policy, and I believe there is scope for this, while taking into
account our specific initial conditions and legal constraints,"
Draghi said in his prepared remarks.
His comments musings were praised on Friday by Italy's
Economy Minister Pier Carlo Padoan and President Giorgio
Napolitano who "were carefully considering the important
information" contained in Draghi's speech, according to a
statement from the president's office.
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