Italian September Confidence Setback Points To A Softer Autumn

The consumer confidence index, published by the Italian National Institute of Statistics (ISTAT), dropped to 91.2 in September from 94.5 in August, reversing the gains achieved in the previous two months. The fall is sizeable and suggests that households remain sensitive to uncertainty and pressure on purchasing power. ISTAT cautioned that the September movement was also partly affected by changes in the organisation of the survey network, so the month-to-month decline should not be read mechanically. On a positive note, consumers signalled declining concerns about future unemployment, suggesting that resilience in the labour market could still help weather the shock of higher inflation on purchasing decisions.

Business confidence declined from 97.0 to 95.9, ending a three-month run of increases. The sector picture was uneven. Manufacturing confidence rose to 91.9 from 90.2 as firms reported better order books, although production expectations softened.

Elsewhere, the signals were clearly weaker. Construction confidence fell to 97.5 from 102.8, dragged down by the residential and specialised works components. The gain in the civil engineering component, more related to EU recovery fund investments, signals that two months after the formal deadline of the plan, a tail effect is still in place. Confidence fell in both markets: services from 99.4 to 96.9 and retail trade from 106.5 to 104.5. In services, both current affairs and orders weakened but expected orders improved in the tourism domain. In retail, assessments of current sales improved, but expectations for future sales deteriorated sharply.

September's confidence release is a warning that the improvement in domestic demand remains fragile. The rebound in manufacturing orders is encouraging and may point to some stabilisation in industrial activity, but weaker expectations across consumer-facing services, retail and construction argue against a strong acceleration in growth. The sharp fall in household confidence could translate into more cautious discretionary spending and a higher propensity to save, even if employment and real-income fundamentals remain supportive.

Overall, the survey is consistent with subdued near-term GDP growth rather than a broad contraction, with the balance of risks tilted to the downside for private consumption in the final quarter.

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