In an ominous sign, Italy has suddenly stopped shopping
The chart shows that retail growth has been in a bad way for a while
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Your support makes all the difference.Private banks recently put together a rescue package for Italy's failing Monte dei Paschi di Siena bank, whose nonperforming loans threatened to tank the country's financial sector. But the bad news keeps on coming.
Italy's shoppers have stopped going to the shops, according to new retail purchasing managers' index data from IHS Markit:
The dotted red line represents 50, the level at which retailers say they see neither an increase nor a decrease in business. The decline began this year after several months of improving results. The data is worrying because Europe generally had solid growth in 2016 until the UK voted in June to leave the European Union.
“July's decrease in retail sales was the seventh in as many months,” according to Markit. “Moreover, the rate of contraction was sharp. The most frequently cited reason was lower footfall. Measured on a year-on-year basis, sales fell at the fastest rate seen since December 2014.”
The chart shows that retail growth has been in a bad way for a while, but it had recently improved into positive territory. (And the comparable manufacturing and services PMI numbers aren't nearly so bad.) Italy's year-over-year gross-domestic-product growth, however, is only about 1%. The UK's is double that, for comparison. So Italy is a country that has no room to maneuver. As Italian Prime Minister Matteo Renzi said this week, “This is my priority, my dream and my nightmare — every day I think about it. Growth, growth, growth.”
Economies are sometimes rescued by their consumers. When recession hits, consumers will often go into debt or spend down their savings, and the resulting activity — shopping — can restart growth (or at least shave off the rough edges).
But in Italy, where the banking sector is already fragile, shoppers are suddenly MIA, again.
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Read the original article on Business Insider UK. © 2016. Follow Business Insider UK on Twitter.
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