Italy Services Activity Contracts Less Than Expected

The S&P Global Italy Services PMI rose to 49.8 in April from 48.8 in March, better than market expectations of 47.6 and indicating a near-return to growth. New business saw an uptick, despite remaining subdued and well below the long-run average. Employment also rose slightly, although the pace of hiring slowed compared to historical trends. Meanwhile, output continued to contract, as firms pointed to persistent uncertainty linked to the Middle East conflict, alongside elevated cost pressures and still-muted inflows of new work. On the pricing front, input costs accelerated to its highest level since early 2023, driven by rising energy and fuel costs as well as increasing wage bills. Looking ahead, firms retained a generally positive outlook for the coming year. However, business confidence remained significantly below its long-term average, as ongoing geopolitical tensions, particularly the risk of a prolonged conflict in the Middle East continue to cast a shadow over expectations.

The S&P Global Italy Services PMI slipped to 48.8 in March 2026 from 51.0 in the previous month, defying market expectations of 52.3. This marked a return to contraction territory for the first time since November 2024, as output declined due to fewer events following the Winter Olympics, generally soft demand conditions, and rising international uncertainty. Similarly, new business contracted for the first time in over a year, with the pace of decline the sharpest since November 2024. Meanwhile, employment levels were broadly unchanged from February, as limited hiring was offset by job cuts elsewhere. On the price front, input costs surged to a more than three-year high, reflecting higher wage pressures and increased costs for raw materials, energy, and fuel, largely linked to the ongoing Middle East conflict. Finally, business confidence fell to a seven-month low, as service providers pointed to a challenging economic outlook and heightened uncertainty tied to geopolitical tensions.

The HCOB Italy Services PMI fell to 52.3 in February 2026 from 52.9 in the previous month, though still marginally above market expectations of 52. New business growth eased compared with the previous month, despite being supported by a renewed increase in export sales. Meanwhile, employment continued to increase amid new business and diminished signs of spare capacity, with hiring activity hitting a seven-month high. On the price front, input cost inflation reached a three-month peak, driven by higher wages and rising transport, energy, fuel, and business services costs. Output prices edged up to a seven-month high, continuing an upward trend that has persisted for almost four and a half years. Looking ahead, service providers expressed more positive expectations for activity over the next year, citing anticipated new business, including wins from new clients. While the level of optimism aligns broadly with the 2025 average, it remains notably below the historical trend.