UPDATE 1-Italy consumers glum ahead of election as wages stagnate

Mon Jan 28, 2013 8:26am EST

* Consumer morale lowest since series began 17 years ago

* Wage growth slowest since series began 30 years ago

* Recession hit Italians in bleak mood ahead of Feb vote (Adds details, report on wages)

By Gavin Jones

ROME, Jan 28 (Reuters) - Italian consumer morale fell to its lowest level on record in January, confirming a grim public mood ahead of a national election next month as voters feel the pain of a long recession.

Separate data on Monday showed wages in 2012 grew at less than half the rate of inflation, helping to explain the fall in morale and the worst slump in consumer spending for more than half a century.

Statistics bureau ISTAT said its consumer confidence index fell to 84.6 in January from 85.7 the month before. That was the lowest level since the series was introduced in January 1996, and was below all forecasts in a Reuters survey of analysts which had expected the index to rise.

All the main components of the survey weakened in January as consumers took a grimmer view of the economic picture and their own personal finances, both now and in the future.

"With confidence bouncing around record lows, cautious household spending will serve as a major obstacle to any recovery in economic activity during 2013-14," said Raj Badiani of IHS Global Insight.

The euro zone's third largest economy has been in recession since the middle of 2011 and most analysts expect gross domestic product to fall around 1 percent this year, following a contraction of around 2 percent in 2012.

Average wage inflation in 2012 came in at 1.5 percent, ISTAT said, the lowest since the start of the historic series in 1983. The negative gap between wages and consumer price inflation last year was the widest since 1995.

Declining purchasing power has hit consumer morale, causing what retail associations and think-tanks say is the deepest decline in consumer spending since World War Two.

Tax hikes introduced by Mario Monti's technocrat government as part of tough austerity measures have helped calm investor fears about the sustainability of Italy's huge public debt but have eroded purchasing power and deepened the recession.

Monti is running at the election at the head of a centrist coalition but he is lagging far behind both the centre-left and the centre-right blocs in opinion polls.

The sub-indexes on current personal finances and overall future prospects both hit all-time lows, suggesting Monti's frequent assurances that an economic recovery is in sight are not resonating with most ordinary Italians.

Consumer spending has long been an Achilles heel of the Italian economy, the most sluggish in the euro zone for at least a decade.

Retail sales in November, the most recent data available, were down an unadjusted 3.1 percent from the year earlier, indicating a much more marked contraction in real or inflation-adjusted terms, and posted a fifth consecutive monthly decline. (Editing by Anna Willard)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.