ROME (Reuters) – The Italian service sector returned to growth in December, recovering from November’s brief period of contraction, although new business declined for a second month in a row, a survey showed on Monday.
The HCOB Purchasing Managers’ Index for Italian services came in at 50.7 in December up from 49.2 in November, and above the key 50 level that separates growth from contraction.
Although confidence in the year-ahead outlook improved and hiring activity picked up, service providers continued to report strong cost pressures, prompting a sharp rise in charges.
“A range of costs are putting pressure on companies, with wages and energy being the most prominent drivers,” said Jonas Feldhusen, an economist at Hamburg Commercial Bank AG.
The survey’s new business subindex came in at 49.1, an improvement on November’s 46.7, but still pointing to an overall contraction, while outstanding business was at 49.2 from 48.3 — its 15th consecutive month below the 50 level.
“This paints a bleak picture for the coming months. Future business expectations are below the 2024 annual average,” Feldhusen said.
The sister survey for the manufacturing sector issued last Thursday showed contraction for a ninth month running in December albeit at a slower pace than the month before, amid persisting declines in output and new orders.
The composite Purchasing Managers’ Index, combining services and manufacturing, also remained stymied in December, albeit at a slower pace of contraction than the previous month, coming in at 49.7 from 47.7 in November.
Italy’s growth rebound from the COVID-19 pandemic is petering out much faster than expected as structural weaknesses resurface, raising risks for the fragile public finances of the euro zone’s third-largest economy.
After gross domestic product unexpectedly stagnated in the third quarter, national statistics bureau ISTAT said last month it expected no near-term recovery and forecast 2024 growth of just 0.5%, half the government’s official 1% target.
(Reporting by Crispian Balmer; Editing by Hugh Lawson)
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