Italy May services PMI 53.2 vs 52.0 expected

• Prior 52.9
• Composite PMI 52.5 vs 52.1 prior

Key findings:

• Business activity rises at stronger rate, while the future outlook brightens
• New business growth softens slightly, but remains historically elevated
• Inflationary pressures intensify

Comment:

Commenting on the PMI data, Nils Müller, Junior Economist at Hamburg Commercial Bank, said:

“Italy’s service sector continued to expand in May, with the HCOB Services PMI rising to 53.2 – its highest reading in nearly
a year. The sixth consecutive month of growth was underpinned by resilient domestic demand and a steady inflow of new
business, helping to solidify the sector’s role as the main engine of Italy’s economic expansion. While the pace of new order
growth softened slightly, it remained elevated by historical standards, suggesting that the recovery is gaining traction.

“Employment growth accelerated to its strongest pace since mid-2024, as firms responded to rising workloads by hiring
additional staff – often on temporary or part-time contracts. Business confidence also improved, reaching a three-month
high, though it remained below the long-run average, reflecting lingering caution.

“At the same time, the external environment continues to cast a shadow over the sector. Export demand fell for a tenth
consecutive month, with the sharpest contraction since January. Survey respondents pointed to subdued global conditions
as a key factor dampening international sales. What will the US-EU trade negotiations bring? We don’t know yet – and until
there is clarity, ongoing trade uncertainty will remain a central theme for Italian services exporters.

“Inflationary pressures, meanwhile, showed signs of reacceleration. Input costs rose amid higher energy prices and wage
burdens, prompting firms to raise their selling prices at the fastest rate in over a year. While this may help protect margins, it
could also test the limits of consumer tolerance in the months ahead. For the ECB, which HCOB Economics expects will
lower its key interest rates once more at the upcoming June meeting, the uptick in service-sector inflation is an unwelcome
development, potentially complicating the path toward broader price stability across the eurozone.”