More Mixed Signals From Italian Confidence Indicators In February

(MENAFN- ING)

Overall, February confidence data confirms a mixed picture: households and construction firms show further gains, whereas manufacturing – and to a lesser extent, services – lost momentum.

Consumer confidence continues to improve

Consumer confidence rose for the third consecutive month, reaching 99.1 – almost two points above the 2025 average. The increase was driven by better assessments of both current and expected economic conditions.

Looking more closely, unemployment expectations ticked up slightly, but this hasn't yet translated into a more cautious attitude, as households actually reported a worsening perception of the current opportunity to save, and an improving perception of the opportunity to buy durable goods. This suggests there is room for a gradual decline in the savings rate, which could support consumption in the first quarter of 2026. This impression is reinforced by the partial rebound in confidence among retail firms after January's drop.

Manufacturing confidence falls

Signals from manufacturing continue to point to a recovery that began tentatively in late 2025 but remains slow and uneven. In February, the manufacturing confidence index slipped back to its December level, weighed down by softening orders and a third consecutive rise in finished goods inventories – factors that are consistently reflected in a slight decline in production expectations.

The downturn is concentrated among consumer goods and intermediate goods producers. By contrast, confidence among capital goods manufacturers improved, supported by slightly better orders, lower inventories, and a notable rebound in production expectations. The cyclical improvement in manufacturing appears ongoing but remains uneven and likely constrained by persistent uncertainty around tariffs. The ongoing recovery in corporate lending is probably providing some support to capital goods producers.

Services confidence also edges lower

Market services remain heterogeneous. Confidence slipped in transport services and tourism, whilst improved in information and communication services and, marginally, business services. The dip in tourism confidence is surprising given the boost expected from the Milan-Cortina Winter Olympics. Still, overall confidence in the sector remains well above last year's average, suggesting that services should continue to act as a stabilising force for GDP growth.

Construction confidence posts a solid rebound

Construction continues to show diverging patterns across its sub‐sectors. Given the significant scaling back of fiscal incentives for residential renovation, it is not surprising that residential construction confidence fell further, along with employment expectations. Conversely, sentiment improved again in infrastructure construction and specialised construction works, both directly engaged in projects linked to Italy's Recovery and Resilience Plan, whose formal deadlines approach this summer.

A broadly gradual recovery remains in place

Today's ISTAT confidence data point to a scenario of very gradual recovery in the Italian economy. Manufacturing remains exposed to tariff uncertainty, but should benefit from demand generated by German defence and infrastructure investment, and, on the supply side, from lower energy prices linked to the Italian government's recently approved energy price decree. After the surprising 0.3% quarter‐on‐quarter GDP increase in the final months of 2025, we expect growth to continue in the first quarter of 2026, albeit at a slightly slower pace.

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