ROME: Italian consumer morale plummeted to its lowest in 16 years in December after Prime Minister Mario Monti introduced a 33-billion-euro austerity package that included tax hikes and pension cuts, data showed on Friday.
National statistics bureau ISTAT's headline consumer confidence index fell more than expected to 91.6 in December, the lowest since the data series began in 1996, after unexpectedly rising to a revised 96.1 in November.
The data was below the median forecast of 95.0 in a Reuters survey of 11 analysts. Forecasts spanned from 93.5 to 96.5. The survey was conducted between Dec 1 and Dec 16, mostly after the Cabinet's Dec 4 passage of the austerity measures.
On Thursday, the Senate cast the final vote to approve the sweeping series of tax increases, pension reforms and spending cuts.
Among the measures that hit consumers immediately were petrol tax increases and the knowledge on the part of some pensioners that their monthly payments be adjusted for inflation.
"The budget restrictions will reduce people's disposable income, their capacity to accumulate savings, and new taxes have pushed up inflation," said Paolo Mameli, an economist at Intesa Sanpaolo in Milan.
A previously introduced VAT increase and the new petrol levies are pushing consumer prices higher, Mameli said. Intesa forecasts consumer spending will decline by almost a full percentage point next year. "It's undeniable that consumer sentiment is going to get worse before it gets better," he said.
The decline in sentiment comes as Italy heads into what economists say will be a prolonged recession. Gross domestic product sank 0.2 percent in the third quarter, as did consumer spending, and isn't seen rebounding before the second half of next year, economists say.
Italian employers' lobby Confindustria predicted earlier this month that the economy will shrink by 1.6 percent next year, four times the 0.4 percent drop forecast by the government.
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