This news today seems to confirm a lot of the points I was arguing in this post on Afoe. It is going to be very hard for Prodi and co to maintain course on deficit reduction if growth in the economy stagnates in 2007 as it looks like it may well do:
Italian industrial production unexpectedly fell in July for the first time in three months as near-record oil prices raised manufacturing costs and weighed on consumer demand.
Output declined 0.3 percent from the previous month when it gained 0.1 percent, the national statistics office Istat said in Rome.....Output dropped 0.2 percent from a year earlier.
The economy of the dozen euro nations is showing signs of losing momentum after expanding at the fastest pace in five years in the second quarter. Crude oil prices reached a record of $78.40 a barrel on July 14. Manufacturers may trim output in coming months as energy cost sap consumer spending and exporters rely on a slowing global economy.
``It looks like there will be a moderation of growth'' in the second half, said Marco Valli, an economist at UniCredit Banca Mobiliare SpA in Milan. ``It remains to be seen by how much but it should be a gradual slowdown.''
French industrial production unexpectedly declined for a second month in July, Paris-based national statistics office Insee said Sept. 11. In Germany, Europe's largest economy, business confidence declined for a second month in August.
The production decline indicates that growth in Europe's fourth-biggest economy continues to lag behind that of its biggest trading partners. The European Commission said Sept. 9 that Italy will expand 1.7 percent in 2006, compared with growth of 2.5 percent in the economy of the dozen euro nations, the fifth year that Italy trails the euro region.
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