Italy’s services sector continues growth despite slight slowdown

What is going on here?

Italy’s services sector posted its sixth straight month of growth in June, despite a slight decline in new business activity in the eurozone’s third-largest economy.

What does it mean?

The HCOB Purchasing Managers’ Index (PMI) for Italian services hit 53.7 in June, slightly down from May’s 54.2 but still well above 50, indicating expansion. The new business sub-index also fell slightly to 53.0 from 53.3 in May, while employment fell to 53.1 from 54.1. Still, the HCOB economist underscored the sector’s resilience. Meanwhile, Italy’s manufacturing PMI contracted for a third straight month, sending the composite PMI — which combines services and manufacturing — down to 51.3 from 52.3. That points to growth, albeit at the slowest pace since February. Italy’s fiscal watchdog noted that the country’s GDP likely grew by 0.3% in the first quarter of 2024, with growth for the year as a whole expected to be between 0.7% and 1%, reflecting last year’s 0.9% growth rate.

Why should I care?

For markets: Growth despite obstacles.

The resilience of Italy’s services sector is boosting market sentiment even as manufacturing faces challenges. The moderate rise in the PMI suggests investors should watch sectors showing stability amid broader economic headwinds. Analysts are forecasting moderate economic growth of between 0.7% and 1% for the year, indicating a cautiously optimistic outlook.

Bigger picture: Dealing with mixed signals.

Italy’s economic performance is mixed, with the service sector showing strength and manufacturing lagging. The overall soft GDP growth, along with stable but slow PMI data, points to the need for balanced economic strategies to strengthen the resilience of the entire sector in the face of potential global economic changes.