Ukraine crisis, inflation affects Italian economy

Rome: The ongoing crisis in Ukraine continued to take a negative toll on Italy’s economic situation, the country’s main statistics entity has reported.

The National Institute of Statistics (ISTAT) said in its monthly update on economic trends that there was “high uncertainty linked to the conflict between Russia and Ukraine” combined with inflationary pressure and a change in monetary policy in the euro zone, Xinhua news agency reported.

The crisis in Ukraine is seen as helping spark an increase in energy crisis that has had a knock-on effect on other parts of the economy, including industrial production and transportation.

The institute also noted the announcements from the European Central Bank that it intended to raise interest rates this month and in September and to at least temporarily halt its economic support for national bond sales.

ISTAT said that its seasonally adjusted index of industrial production’s post-pandemic recovery phase that started in January was “interrupted” in May, though it still remained above levels from 2021.

Household confidence was “deteriorating” due to consumer behavior amid a weakening labor market, it said.

Rising costs in June showed “a new widespread acceleration across all components”, said ISTAT, noting that while the difference between the inflation rate in Italy and the average in the euro zone as a whole was shrinking, it remained negative.

“The growth outlook for the coming months appears to be negatively affected by the continuation of the inflation phase, the deterioration in the trade balance, and the fall in household confidence,” ISTAT said.

In an upbeat note, however, the institute said business sentiment had continued to improve, with retail sales growing by 1.9 per cent in value and 1.5 per cent in volume in May compared to April.