Italian inflation stabilised below the 1% mark in June (at 0.9% y/y) due to the still significant deflation in the energy component (-8.6% y/y), and the slowdown in food prices (2.1% y/y in May; -1.8 pp over three months). Although the producer price index is still negative year-on-year (-3.5% in May), it is beginning to strengthen on a monthly basis (+0.3% m/m), suggesting that the disinflationary phase in consumer prices could be reversed over the coming months.
Household confidence, which had been deteriorating since the start of the year, recovered somewhat in June (+1.4 points over one month). Expectations for the financial and economic situation over the next twelve months improved (+0.8 and +2.9 points over one month respectively), supported by the ECB's interest rate cuts and the good performance of the labour market. Nevertheless, private consumption is likely to remain subdued this quarter, as intentions to make major purchases (-29.9[1]) or to buy a car (-75.3[2]) are weak; retail sales in volume have also stagnated over the last three months compared with the previous three months (0.0% 3m/3m in May[3]), while new vehicle registrations have fallen (-0.2% 3m/3m in June[4]).
The Composite PMI remained in the expansion zone in June (51.3), but its decline, observed since last April, continued (-1 point over one month) due to the persistent weakness of the manufacturing industry (manufacturing PMI at 45.7). However, the sub-component relating to employment in this sector is up on May (49.5; +0.8 points). For its part, the services sector continues to be the driving force behind the Italian private sector. Despite a slight fall over the month (-0.5 points), the associated PMI remains in the expansion zone (53.7). Expectations for new business remain high, and have even returned to their highest level since February 2022 (68.1).
After growing by 0.3% q/q in Q1, Italian real GDP is expected to slow slightly quarter-on-quarter in Q2, to 0.2% q/q. As an annual average in 2024, we expect growth to reach 1.1%.
Article completed on 12/07/2024
