Economic surveys remain deteriorated. The PMI indices indicate a contraction in activity that is now more widespread, although the downturn is particularly pronounced in the manufacturing sector. The manufacturing PMI fell by 1.9 points to 44.9 in October, while the services PMI dropped more sharply below the 50 mark, after recording a decline of 2.2 points to 47.7. The household consumer confidence index in Italy is decorrelating from inflation expectations– which have been stable since the spring – and is now falling due to the effect of more subdued economic and employment prospects. In fact, the monthly fall in the confidence indicator (-2.4 points) was the steepest in the last fifteen months. Durable goods purchase intentions are feeling the pinch, falling for the fourth consecutive month in October.
Nevertheless, the labour market continues to perform well, with a volume of employment (23,656 million) and an employment rate (61.7%) rising again in September, while the jobless rate is approaching its lowest level in fourteen years, at 7.4%. In addition, the crossover between the wage and inflation curves, expected this autumn, would indicate gains in purchasing power, which should underpin household consumption. Contractual hourly wages grew less rapidly than inflation in September, up 3.2% year-on-year. However, the rise in consumer prices slowed significantly in October, falling from 5.6% to 1.8% in harmonised terms. This drop was mainly fuelled by the sharp deflation of the energy component, down -19.7% year-on-year, which occurred despite a significant increase in regulated tariffs in October.
Economic growth in Italy remains on a knife-edge. According to preliminary figures, real GDP stagnated in the third quarter after contracting by 0.4% q/q in Q2. However, we expect activity to pick up again in the final quarter of 2023, followed by a stabilisation in the growth rate between 0.2% and 0.3% throughout 2024. With an estimated annual average of 1% in 2024, Italy is expected to perform above the eurozone average of 0.8%.
Guillaume Derrien (completed on 23 November 2023)
