Italy: inflation at minimum levels. There is little to be happy about

The economy is doing so well in Italy that inflation is collapsing, unlike what happens in France and Germany.

Italy's annual inflation rate fell to 0.6% in December 2023 from 0.7% in November, slightly below expectations of 0.7% and indicating the impact of the ECB's prolonged restrictive monetary policy . Our economy is slowing down sharply and inflation is driving it.

As a result, inflation rates, excluding energy and fresh produce, slowed to 3.1% from 3.6% in the previous month. Energy deflation compared to the previous year continued for both the unregulated type (-21.1% vs -22.5%) and the regulated type (-41.7% vs -34.9%). Additionally, the cost slowed for processed foods (5% vs 5.8%) and recreational and cultural services (3.6% vs 4.6%). On the other hand, it increased for unprocessed foods (7% vs 5.6%). Over the month, Italian consumer prices increased by 0.2%, following the 0.5% decline recorded in November.

Here is the relevant graph:

We see inflation over a longer horizon

Two quick observations:

• first of all, Italy has three points of inflation less than Germany and France, which had inflation at 3.7% in December. Even the core is lower, so our salary dynamics are also lower, i.e. the estimates do not move;
• we are at a much lower level of inflation than that recorded in 2018-19, pre-covid. So the effect of monetary and fiscal stimuli is largely resolved.

At this point the inflation signal, combined with that of the PMI indicators, indicates that Italy is facing very tough economic times. Yet no one seems to care.

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The article Italy: inflation at minimum levels. There is little to be happy about comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/italia-inflazione-a-livelli-minimi-ce-poco-di-cui-stare-contenti/ on Sat, 06 Jan 2024 07:00:43 +0000.