Former Italian Prime Minister Matteo Renzi’s €80 and the monetary flood from the European Central Bank’s quantitative easing were not enough: ISTAT has determined that in 2016, Italy remained in deflation. It is the first time this has happened in more than half a century. In 1959, the decline in consumer prices was 0.4 percent. In 2016, it was 0.1 percent.
The agreement reached in early December among the OPEC countries to reduce oil extraction in order to increase prices may have influenced these effects. Crude oil is back above $50 and it was precisely this energy component that buried the general index. It caused the upturn in inflation recorded in December with prices rising by 0.5 percent due to the high cost of gasoline. In a month, the price of diesel for transportation and heating increased.
Deflation means a lack of domestic demand, which will be hit further with the sting of rising household bills in January. “ISTAT has not incorporated yet the increase of electricity and gas in January, which will add €52.50 for each family,” says Massimiliano Dona of the National Consumers Union.