January's business confidence surveys recovered in Italy: the composite PMI index rose 2.1 points and now stands at 50.7. This improvement was driven by services, for which the PMI returned to the expansion zone after six months in contraction territory (+1.4 points, at 51.2). The companies surveyed are now reporting an increase in upcoming new business (52.5; +4.4 points), bringing employment with it (51.2). Meanwhile, the deterioration in the manufacturing sector, observed since April 2023, is continuing to slow, with the associated PMI index gaining 3.2 points in January, standing at 48.5.
Despite a slight increase in the Harmonised Index of Consumer Prices (HICP) in January (+0.9% y/y; +0.4 percentage points over a month), Italy remains the country with the lowest inflation rate in the Eurozone. This has contributed to renewed consumer confidence in Q4 2023 (improvement in the balance of opinion shifting from -19.5 in October to -16 in January), with expectations for the economic situation over the coming year no longer falling (+6.4 points in three months, to -11.4 in January). Furthermore, based on recent trends in the producer price index, which recorded its ninth consecutive month of deflation (-16% y/y in December), Italian inflation should remain low over the coming months.
The labour market continued to hold up well, posting a further fall in the unemployment rate in December and is at its lowest level for fifteen years (7.2%), an increase in the total volume of jobs (+13,727 over a month, 23.7 million), and a rise in the employment rate (61.9%). Combined with the very strong wage growth recorded in December (+7.9% y/y), this labour market robustness should continue to buoy household purchasing power and private consumption during the current quarter.
After a quasi-stagnation of economic activity recorded in Q3 2023 (0.1% q/q), Italian real GDP grew by 0.2% q/q in Q4, according to the preliminary estimate published by Istat. This weak growth can be explained by the downturn in industrial production (down 0.5% over three months) and retail sales (-0.1% m/m in December). We expect Italian GDP growth to remain moderate in Q1 2024 (0.2% q/q), before regaining more significant momentum over the rest of the year (0.4% q/q for the last three quarters).
Article completed on 26/02/2024
