Does Italy's Deflation Risk Hinge on Oil Prices?

From April 2012 through April 2016, Italy's inflation rate slid from about 3.6% to near -0.5%, according to Eurostat.

Also in April, consumer prices in Italy fell 0.4% on a yearly basis, a steeper slide than than the 0.2% decline in the 19-nation Eurozone.

So, how can Italy prevent a deepening deflation?

The independent Italian National Institute of Statistics provides their assessment.

Read this excerpt from a May 20 Bloomberg article:

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 [May 20]. 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 share of products showing an annual decline in their prices resumed rising in Italy during the first quarter, Istat said in the report. That was mainly due to lower energy costs ... .

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