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Italy’s Trade Balance Falls

James Boston
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Italy’s Trade Balance Falls

Italy has stemmed a run of falling consumer sentiment with the publication this morning of the September confidence data. The Consumer Confidence reading for the month has ticked up moderately to 102.0 from an August reading of 101.9, predictions were pointing towards a rise to about 102.2, this was missed but the report nonetheless brings an end to the five month sequence of deteriorating feeling among consumers.

On a less positive note the Trade Balance numbers have suffered according to the latest report, most notably the non EU trade figure has fallen from a surplus of €2.15Bn to just €1.73Bn. The falling trade figures are surprising given the recent drop in value of the Euro, the single currency had remained somewhat unnaturally elevated for an extended period of time during much of the past two years and this would have affected the competitiveness of Italian trade with non EU countries. It is evident that the improved competitiveness that the devalued currency brings is being offset by a global slowing in demand and particularly by the economic sanctions imposed by the EU on Russia.

Global economic conditions and to a large extent the broader European Unions reactions to geopolitical events are beyond the control of the Italian policy makers. What is within their control, in so much as it can be, is the opportunity to introduce structural reforms. Italy, with few exceptions, is the most notoriously difficult country in the Eurozone in which to do business. It is widely acknowledged that a reform of the Labour market is long overdue, this is even beginning to gain some acceptance among Italy’s labour unions and other vested interests. It appears however that the administration of Matteo Renzi is easing up on it’s initial reform programme, this initial promise of one reform per month made during the election campaign has just turned into more gradual 1,000 days to reform according to the latest policy announcement from the administration. Likely the price of compromise but this about turn too risks like falling by the wayside, particularly if there is any sign of a global upturn over the next couple of years.

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