Low inflation shows weaknesses in Italy’s economy

IMG class=hide alt=”Low inflation shows weaknesses in Italy’s economy” src=”http://www.mineralfossil.com/wp-content/uploads/2014/01/wpid-292574e47c0fa91e427f162b2bd60b73.jpg” (By Sandra Cordon) (ANSA) – Rome, January 14 – Italy’s annual inflation rate in 2013 averaged just 1.2% – a dramatic drop from the 3.0% average in 2012 that demonstrates a weakness which a business group on Tuesday said reflects pain in Italian households. PLast year’s rise in the consumer price index was also the smallest since 2009, national statistical agency Istat reported./PPWhile high inflation is a serious problem for economies, an inflation rate that is too low is often judged to be a sign of intense weakness as it can indicate sluggish demand and growth. The low rate of inflation, combined with weak consumption and economic growth, demonstrates how tightly Italians are being squeezed, said business group Confesercenti./PPIt also singled out a new municipal tax that is to replace a hated IMU property tax for criticism./PP”Families are caught between the anvil of a purchasing power that is struggling to recover – also because of a record unemployment – and the hammer of taxation, especially at the local level,” said the group./PP”The consequence is that families continue to be prudent, cut consumption and enact behaviors that aim to increase savings”./PPConfesercenti urged political leaders to “jump-start” the economy by boosting employment, domestic demand, consumption and business investment./PPIstat also reported that on a monthly basis, the inflation rate rose slightly – just 0.2% – in December compared with November due to higher food prices./PPThe slowdown in inflation in 2013 is directly linked to the collapse of household consumption, said the Italian Farmers Confederation (CIA)./PPAbout 60% of Italian family incomes are absorbed each month by such basic bills as taxes, mortgages, and other home loans, which means less is available for food, beverages and a few frills, said the CIA./PPIt said its research shows that more Italians are clipping coupons, searching for discounts and promotions, and buying no-name brands to save money. The broader economic slowdown also cut into federal tax revenues near the end of 2013 as the worst recession since the Second World War was forecast by government officials to be ending. Tax revenue in the first 11 months of 2013 stood at 339.1 billion euros, a “slight drop” over the same period in 2012 when taxes collected reached 340.7 billion euros, the Bank of Italy said./PPIt also noted that Italian public debt rose by 18.7 billion euros in November to a record high of 2.104 trillion euros. However, the public debt would “very likely” fall when December calculations are available, due to a large budget surplus and a sharp drop in Treasury liquid assets, the Bank of Italy added. The latest numbers came as the President of the European Commission Jos