Rome

Italians' spending power crumbles in recession

Higher taxes, inflation eat into salaries

Italians' spending power crumbles in recession

(By Paul Virgo) Rome, April 9 - National statistics agency Istat released a series of alarming figures about the state of Italy's recession-hit economy on Tuesday, including data that showed Italians' spending power crumbled by almost 5% last year. Istat said households' spending power fell 4.8% in 2012 with respect to 2011, adding that the decline was even worse in the last quarter, when it was down 5.4% on the same period in the previous year. Factors include government tax hikes eating into disposal income and price rises outstripping increases in salaries to cause real incomes to fall. Last week, Istat said Italy's tax burden hit a record high of 52% in the fourth quarter of 2012, up 1.5% on the same period in 2011. The average burden for the whole of 2012 also reached a record of 44%, up 1.4% on 2011. On Tuesday, meanwhile, Istat said hourly wages rose 1.4% in February with respect to the same month in 2012. But with inflation at 1.9%, this meant that real incomes fell by 0.5%, as prices rose by more than salaries. The agency provided a modicum of consolation on Tuesday, saying that the drop in real income was less than in previous months. The tax burden has risen after hikes contained in austerity measures by outgoing Premier Mario Monti's emergency government to steer Italy out of the centre of the eurozone crisis. These measures eased concerns on the international money markets about Italy's ability to weather the crisis but they also deepened the country's recession and pushed unemployment up to record highs of well over 11%. Close to three million people are out of work and the jobless levels for the young are particularly alarming. Earlier this month Istat said 37.8% of young people were jobless in February. On Tuesday Istat also released figures that showed how lower purchasing power had translated into drops in saving and consumer spending The agency said that consumer spending was 1.6% lower in 2012 than in 2011 and that Italians' propensity to save money had fallen to its lowest level since records on this began in 1990. It said 8.2% of Italian households' earnings were saved in 2012, down 0.5% on 2011. There was also bad news on Tuesday from the Bank of Italy, which said the number of bank loans granted in February was 1.3% down on the same month in 2011. This is a worrying sign as attempts to pull the Italian economy out of its longest recession in 20 years will be hampered if households and businesses have trouble obtaining credit. The central bank said loans to non-financial companies were down 2.6% in February compared to the same month in 2011 and down 0.7% for households. It added that the percentage of bank loans in which clients failed to meet repayments increased to 18.6% in the 12 months up to January, compared to 17.5% in January.

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