ITALY: inflation hit 12- year high

Consumers and retailers concerned over soaring prices

(ANSA) - Rome, June 30 - Italy's year-on-year inflation hit a 12-year high in June sparking major concern among both consumers and retailers.

National statistics bureau Istat reported on Monday that inflation in June hit 3.8%, its highest since July 1996, with a 0.4% monthly increase in its consumer price.

Aggravating inflation again this month were the soaring costs of pasta and other wheat products along with runaway prices for fuels.

Compared to June 2007, pasta prices were up 22.4%, after climbing 20.7% the previous month, while bread cost 13% more, following a 13.3% hike in May.

Overall food and non-alcoholic beverage prices rose above average, jumping 6.1% in one year.

According to the consumer group Codacons, ''the record increases for food will have a very strong repercussion on consumer spending, which this year could fall by as much as 5%''.

The price increases over the past six months, observed Codacons chairman Carlo Rienzi, ''will cost each family a whopping 1,500 euros more''.

In order to combat inflation, Codacons called on the government to ''introduce triple-pricing by decree to show the consumer the cost of a product at its source and then at the wholesale and retail levels''.

The Coldiretti farmers' union reported that in the first three months of the year rising food prices had resulted in a 5.5% drop in the amount of bread Italians buy and a 2.5% reduction in the amount of pasta they eat.

Overall family spending on food, Coldiretti observed, is down 0.4% Energy prices in general rose 14.8% over June of last year, compared to a 13.1% hike in May, and were 2.8% higher than the previous month.

Diesel prices in one month jumped 5.5% and were 31.5% higher than June 2007, while gasoline prices rose 4.7% for the month and 12.6% for the year.

The general decline of consumer spending and the surge in inflation now also has retailers alarmed, with the national retailers association Confcommercio warning that ''if oil prices do not come down we can expect inflation to average out at 4% in 2008, instead of the 3% rate previously expected''.

''At this point it is no longer a question of inflation in one sector as opposed to another but involves the stability of the Italian economy as a whole,'' Coldiretti added.

The national association of retail services operators Confesercenti is also worried over the possibility of interest rates going up to combat inflation, a move they feel would dash all hopes of an economic recovery.

''If oil hits $200 in 2008 and interest rates rise to 4%, Italy will see zero GDP growth and this will lead to further repercussions in consumer spending even in healthy areas like tourism,'' Confesercenti warned.

Istat on Monday also reported that producer prices in May leapt by 7.5%, the biggest year-on-year jump since January 2003.

Despite hitting a 12-year high, inflation in Italy was below that of the 15-nation euro zone, where it rose this month to 4%, from 3.7% in May.