Rome

Italians' spending power plummets

Retailers say 2012 was worst year since World War II

Italians' spending power plummets

Rome, January 9 - Istat said Wednesday that the spending power of households in recession-hit Italy plummeted last year while the nation's retailers said 2012 is set to go down as the worst year since World War II for consumer spending. The national statistics agency said Italians' spending power fell by a massive 4.1% in the first nine months of 2012 compared to the same period in 2011. A factor is the tax increases that led to Italian disposable incomes being 1.9% lower in the third quarter of last year than in the same three months in 2011, Istat said. Spending power has also been eroded by drops in real incomes caused by inflation outstripping salary increases. Retailers' association Confcommercio said its consumer spending index continued a downward trend in November, when it registered a 2.9% drop compared to the same month in 2011 and a 0.1% fall with respect to October. "It is clear that 2012 is set to be remembered as the most difficult year for consumer spending in the post-war period," Confcommercio said. "The continuation of negative year-on-year results (in the index) in the final months of 2012 shows that the crisis is still very much present in the economic system... "It is unlikely that our economy in general, and consumer spending in specific, will start to show signals of significant improvement in the short term". Austerity measures outgoing Premier Mario Monti's government passed to put Italy on course to balance the national budget in structural terms this year and move the country away from the centre of the eurozone debt crisis are widely seen as having deepened a recession that started in 2011. Wednesday's negative data will not boost Monti's bid to stay at the helm of government after he opted to run in next month's general elections on a reform platform backed by several centrist parties. On Tuesday Istat said unemployment in Italy remained at a record high of November at 11.1%, while youth unemployment reached an unprecedented level of 37.1%. There was some positive news though. Istat said Wednesday that Italy's public deficit fell to 3.7% with respect to gross domestic product in the first nine months of 2012, 0.5% lower than in the same period in 2011, thanks to government tax hikes. The national statistics added that the deficit-GDP ratio fell to 1.8% in the third quarter of 2012, 0.7% lower than in the same three months in 2011. Istat said the new and much-criticised IMU property tax, introduced by Monti's emergency administration of unelected technocrats, was the driving force of the higher tax revenues that have brought down the deficit.

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