ROME: Italy’s economic recovery this year may include a limited rise in employment and domestic consumption, but without a further increase in energy prices the risk of deflation won’t go away, the country’s statistics office said.
Recent trends in commodity markets prompt some “upside tensions in prices within the manufactured-good industry and services,” Rome-based Istat said in its annual report published on Friday. Still, “in the first half of 2016 that creates a plausible scenario marked by periods of weak annual consumer price growth followed by episodes of deflation.”
Investors’ concern that the euro region faces deflation may be easing amid oil futures that traded in New York near a six-month high this week, and the European Central Bank’s stimulus plan. That didn’t stop policy makers, including Italy’s central bank chief, from raising alerts on the potential impact of an extended deflationary period on private and public finances. The current outlook justifies the ECB’s stimulus, outweighing the burden of low rates for savers and the risk of inflated asset prices, Bank of Italy chief Ignazio Visco said in an interview with Handelsblatt published on Tuesday.
