The Continued fall of the last month Retail prices in spite of rise in Italy’s VAT to 22% on 1 October 2013. It was published in the Italian statistical institute on 27 November 2013 regarding pricing information for Oct-Nov 2013 which shows that the Consumer Prices Index had fallen by -0.4%. This indicates the economic position of Italy as the economy continued with recession even after nine quarters which is the longest in the Eurozone. The recession is driving rising unemployment that means there is a shortage of disposable income and the reason is the decline in retail prices.
A 1% rise in VAT which contributes to the October rise of 22% that creates 1% to 2% short term inflation as retailers try to pass on the tax increase. However, these latest inflation numbers show that shops have to absorb the VAT hike as an extra cost and face a further squeeze on their margins. The Italian statistical institute Istat estimated that there was only 0.4% inflationary impact because of the VAT rise. This implies a retail price fall in real terms of -0.8%. Italy already raised VAT by 1% in 2012 to 21% in 2011 during the Euro crisis. The average EU VAT rate is now over 21%.
