Italy business and consumer confidence morale fall in July as political instability returns

ROME, July 27 (Reuters) – Morale amongst Italian businesses and consumers fell in July, a month that marked the return of political instability to Italy with the collapse of Prime Minister Mario Draghi’s national unity government, data showed on Wednesday.

National statistics institute ISTAT’s manufacturing confidence index dropped to 106.7 in July from a downwardly revised 109.5 in June, lower than a median forecast of 108.0 in a Reuters survey of 10 analysts.

The June figure was previously given as 110.0.

ISTAT’s composite business morale index, combining surveys of the manufacturing, retail, construction and services sectors, fell to 110.8 from a previous 113.4, with declines in the manufacturing and services sector outweighing improved sentiment among constructors and retailers.

Consumer confidence this month dropped to 94.8 from 98.3 in June, against a median forecast of 96.6 in the Reuters’ poll. It was the lowest reading since May 2020.

Draghi lost power last week after three key coalition partners withdrew their support for his 18-month-old administration. Early elections have been called for September.

The political turmoil has come against a backdrop of challenging economic conditions, with Russia’s invasion of Ukraine pushing up energy costs and heightening uncertainty for businesses.

European Union energy ministers approved on Tuesday a proposal for all EU countries to voluntarily cut gas use by 15% from August to March with compromise deals to reduce the cuts for some countries, including Italy which agreed to a 7% reduction.

But despite facing many headwinds, the euro zone’s third largest economy had appeared to be holding up better than expected a few months ago when some economists were forecasting a recession triggered by surging prices.

Draghi’s government revised down in April its 2022 economic growth forecast to 3.1% from a 4.7% projection made last September.

ISTAT gave the following data on the July manufacturing confidence survey:

July june may april

Overall index 106.7 109.5r 109.0r 109.7r

Orders level -0.3 6.3r 4.5r 5.4r

Inventories 0.9 1.7 0.4 -0.7

Output outlook 5.4 7.7r 6.9r 6.7

r=revised

— Reporting by Crispian Balmer

crispian.balmer@thomsonreuters.com; Reuters Messaging: crispian.balmer.reuters.com@reuters.net