Private banks put together a rescue package for Italy’s failing Monte dei Paschi di Siena bank, whose non-performing 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 manager index data from IHS Markit:
The dotted red line represents 50, the level at which retailers say they see neither an increase or decrease in business. The decline began this year, after several months of improving results. The data are worrying because Europe generally had solid growth in 2016 until the Brexit EU referendum vote.
“July’s decrease in retail sales was the seventh in as many months. Moreover, the rate of contraction was sharp,” according to Markit. “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.) However, Italy’s y-o-y GDP growth is only about 1%. The UK’s is double that, for comparison. So Italy is a country that has no room to manoeuvre. 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.