Roundup: As Italy's inflation looks stable, consumers worry about energy price growth

2021-07-31 23:35:51 GMT2021-08-01 07:35:51(Beijing Time) Xinhua English

ROME, July 31 (Xinhua) -- Amid the latest data showing a stable inflation trend in Italy, with food and non-alcoholic drink prices declining, rising costs of energy products seem to feed concerns among consumers.

The all-item consumer price index increased by only 0.1 percent in June against May, and by 1.3 percent on an annual basis, the National Institute of Statistics (ISTAT) said on July 15.

More specifically, ISTAT's latest report showed prices of unprocessed food and of transport services decreased compared to June 2020 -- by 1.1 percent and 1.4 percent, respectively -- and those of processed food, including alcohol, declined by 0.4 percent.

Still on an annual basis, prices related to recreation services and personal care registered a 1 percent increase, while those of regulated energy products and non-regulated ones grew by 16.9 percent and by 12.8 percent, respectively.

"Inflation in June is still mainly supported by the prices of energy goods," ISTAT noted.

The agency however explained that "signs of mild recovery are being seen also in other product sectors, with prices of processed food resetting the decline they registered in May (2021), and those of recreational, cultural and personal care returning to growth."

Economist Federica Brunetta, assistant professor at the LUISS University Business School in Rome, noted the latest inflation data and the overall trend so far in 2021 were due to some factors.

"First of all, there was a clear increase in the prices of raw materials, which follows the marked drop registered during the COVID-19 lockdown phase."

"In recent months, as Confindustria (Italy's main industrial association) has also recently underlined, raw materials have returned to growth, starting with the (oil) Brent price and therefore with energy prices," she explained.

This factor combined with an increase in the prices of CO2 emission allowances affected "the entire chain up to final consumers," according to the economist.

Stopping at a gas station along the busy Tuscolana street in southeast Rome in a recent afternoon, a 51-year old insurance company clerk said she did not notice any sensible rise yet in what she would averagely spend for fuel every week, but she would expect that to happen soon.

"Now that most activities and travels are allowed again (since anti-COVID restrictions are at the lowest level in the country), I guess fuel prices will start to rise month after month," Maria, who gave her first name only, told Xinhua.

She explained she would usually refuel her car twice a week, spending an average of 60-65 euros (71-77 U.S. dollars).

"If not in August already, I expect this sum to increase up to 70-75 euros per week by autumn," she said, adding that she feared the same might occur with her utility bills.

Indeed, her expectations seemed to find confirmation in the latest report by the Italian Regulatory Authority for Energy, Networks and Environment (ARERA), which in July estimated the average household spending for electricity would rise from 20.83 euro cents per kilowatt/hour in the second quarter of 2021 to 22.89 euro cents in the third quarter.

In a longer perspective, another factor to consider was the good mood being registered among companies and consumers, Brunetta suggested.

In July 2021, in fact both the business confidence composite index and the consumer confidence index rose, from 112.8 to 116.3 and from 115.1 to 116.6 respectively, ISTAT stated on Thursday.

"The business confidence rose to its record high since 2005, which is significant, and the consumer confidence reached its highest level since September 2018 ... it means both feel the situation improving at general and at personal level," Brunetta noted.

This was likely to affect the inflation trend, as the Bank of Italy also suggested in its quarterly survey on inflation and growth expectations among industrial and service firms issued in mid-July.

The survey recorded "a significant rise" in the share of firms reporting an improvement in the general economic situation in the last quarter and in their expectations regarding their own operating conditions over the next three months.

"Consumer price inflation expectations (among firms) rose over all time horizons, regaining the levels registered in the first half of 2019," the Bank of Italy wrote.

The central bank added firms would also expect to raise their own selling prices over the next twelve months. "Such rise in expectations is associated to the recent inflation growth recorded in the official consumer prices index," it said. Enditem