Italy’s service sector activity hits highest level since April 2023

Investing.com -- Italy’s service sector recorded its strongest growth in over two-and-a-half years in November, with the HCOB Italy Services PMI Business Activity Index rising to 55.0 from 54.0 in October.

The expansion was driven by a surge in new business, which reached a 19-month high, according to data collected between November 12-25. Companies reported working with new customers on new projects amid a general improvement in services demand.

"Italy’s service sector gained traction in November, marking the sharpest rise in over two-and-a-half years," said Nils Müller, Junior Economist at Hamburg Commercial Bank. "This momentum was underpinned by a surge in new business, which grew at its fastest pace since mid-2024, driven by successful client acquisition."

Despite the domestic strength, export business returned to contraction in November after a month of growth. Survey participants cited challenging international demand conditions and weakness in the automotive sector as contributing factors.

Employment in the services sector increased for the tenth consecutive month, though the pace of job creation was only marginal and in line with long-term trends. Companies reported some spare capacity, as indicated by a slight drop in outstanding business.

Inflationary pressures intensified during the month, with firms reporting higher costs for energy, maintenance, administrative expenses, raw materials, and wages. The rate of input cost inflation was above the series average and described as steep overall.

In response, service providers raised their charges to partially recover increased costs, with selling price inflation reaching a four-month high.

The broader HCOB Italy Composite PMI Output Index, which includes both services and manufacturing, rose to 53.8 in November from 53.1 in October, marking its highest level since April 2023.

The improvement was primarily driven by the services sector, as manufacturing output growth was only slight and slower than in the previous month.

"The buoyant services performance lifted overall private sector growth," Müller noted. "With demand strengthening and confidence improving, Italy’s economy enters year-end on firmer footing, though inflation and subdued international demand remain key risks."

Hamburg Commercial Bank expects Italian GDP to grow by 0.5% year-on-year in 2025 and 0.8% in 2026.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.