Italy's services sector showed signs of weakening in November, with the Services PMI dropping to 49.2, down from 51.2 in October and falling short of the 51.2 forecast. This marks the first decline in the sector's activity since early 2024. The Composite PMI, which combines services and manufacturing, also slipped into contraction territory, falling to 47.7 from 51.0 in October.
Key findings from the data indicate a moderate decline in activity within the services sector, which saw the sharpest drop in new business in over two years. New orders, particularly from international markets, remained weak, extending a four-month trend of reduced demand. This slowdown is attributed to ongoing economic uncertainty, including the potential impacts of the US election and the risk of a trade war, which have led to more cautious consumer and business behavior across Italy.
While the service sector’s performance has been challenging, there is some positive news. After a slight downturn in October, companies in the services sector made modest efforts to expand their workforces. However, with business activity continuing to contract and new orders dwindling, the outlook for job growth remains uncertain. Companies are likely to rely more on temporary contracts to maintain flexibility in an unpredictable economic environment.
Despite the challenges, there remains cautious optimism about future growth. Companies remain hopeful about acquiring new clients and are generally positive about the prospects of recovery, though confidence has waned. The future outlook index, which tracks expectations, fell below its long-term average, reflecting concerns about the sustainability of growth in the coming months.
Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, commented on the data, noting that the Italian economy is likely to experience weak growth in the fourth quarter, driven by stagnation in both manufacturing and services. The ongoing uncertainty and weak demand for Italian exports are expected to weigh on business activity, and further pressure on employment could follow if these trends persist.
Overall, the November PMI data suggests a tough end to the year for Italy's service sector, with challenges in demand and employment likely to continue.
Comments