Italy’s Services PMI Surges to 55.0; Composite Beats Forecasts as Demand Rebounds, Price Pressures Stir
Italy’s services engine accelerated in November, pushing the HCOB Composite PMI to its highest since April 2023 and beating expectations—an encouraging signal for growth that could complicate the inflation outlook for the ECB.
Services-led expansion accelerates
Italy’s HCOB Services PMI rose to 55.0 in November from 54.0, marking the strongest monthly upswing in more than two and a half years. The HCOB Italy Composite PMI climbed to 53.8, topping the 53.2 consensus and up from 53.1 in October, underscoring that services remain the key driver of private-sector growth while manufacturing makes only a modest contribution.
Demand revives, but exports lag
New business grew at the fastest pace in 19 months, helped by successful client acquisition and firmer domestic demand. However, export orders slipped back into contraction, with some firms citing ongoing global headwinds and weakness in the automotive supply chain—an important bellwether for Italy’s industrial base.
Costs and prices firm, keeping ECB calculus in play
Inflationary pressures intensified. Input cost inflation accelerated to the steepest rate since June, driven by higher wages and energy, and service providers raised selling prices to pass through part of the burden. For markets, a stronger growth pulse alongside stickier price pressures could temper the depth or timing of 2025 ECB rate-cut bets. If sustained, the mix is typically euro-supportive at the margin and may keep front-end yields underpinned.
Labor and capacity: steady hiring, easing backlogs
Companies continued to hire for a tenth straight month, though headcount gains were only marginal and broadly in line with long-run trends. Backlogs of work eased slightly, indicating some remaining spare capacity even as activity improves.
Outlook and market takeaways
Business expectations for the year ahead reached a four-month high, supported by planned investment and anticipated customer wins. Nevertheless, confidence remains below historical norms given uncertainty around international demand and the pace of AI adoption.
HCOB’s baseline sees Italian GDP growing by 0.5% year-on-year in 2025 and 0.8% in 2026. For traders, the beat on PMIs points to:
– Potential near-term support for EUR if domestic resilience reduces aggressive ECB easing pricing.
– Mixed implications for BTPs: stronger growth may narrow spreads via improved risk appetite, but firmer price pressures can lift yields.
– A tilt toward domestically oriented equities, with banks and services cyclicals typically sensitive to PMI strength.
As liquidity thins into year-end, data surprises like this can have outsized impact across FX and rates—positioning and ECB communication will be crucial. BPayNews will monitor how markets recalibrate ECB cut expectations against incoming inflation and wage prints.
Key points
- HCOB Italy Services PMI rose to 55.0 in November (from 54.0), the sharpest monthly rise in over 2.5 years.
- Composite PMI printed 53.8, beating 53.2 expected and up from 53.1, the highest since April 2023.
- New business expanded at the strongest pace in 19 months; export orders slipped back into contraction.
- Input cost inflation accelerated to the fastest since June, with firms lifting selling prices.
- Hiring continued for a 10th month; backlogs eased, indicating spare capacity.
- Business expectations improved to a four-month high, though below long-run norms.
- HCOB expects Italian GDP growth of 0.5% in 2025 and 0.8% in 2026.
Frequently Asked Questions
What did Italy’s latest PMIs show?
November data signaled a stronger services-led expansion. The Services PMI rose to 55.0, and the Composite PMI beat expectations at 53.8, the highest since April 2023.
Why does this matter for the euro?
Stronger growth alongside building price pressures can reduce the urgency for aggressive ECB easing, which tends to be modestly supportive for EUR if sustained.
How might Italian bonds react?
Improved growth can tighten BTP–Bund spreads via better risk sentiment, but faster cost and price growth could lift yields. The net effect will depend on ECB signals and upcoming inflation data.
Are inflation pressures a concern?
Yes. Input costs rose at the fastest pace since June, and firms raised selling prices. If this persists, it could complicate the ECB’s rate-cut timeline in 2025.
What are the key risks?
Subdued external demand—evidenced by contracting export orders—and sector-specific weakness (notably autos) remain headwinds, even as domestic demand improves.
What should traders watch next?
Eurozone and Italian inflation prints, ECB communications, wage trends, and global growth signals. These will shape rate expectations, FX volatility, and sovereign spreads into year-end.
