Italy’s service sector demonstrated notable resilience in November, with the HCOB Business Activity Index rising to 55.0, surpassing expectations of 54.0 and marking the most significant increase in over two years. This growth was primarily driven by a robust surge in new business, which reached its highest level in 19 months, indicating a positive trend in client acquisition and market demand.

Despite the encouraging performance in services, the manufacturing sector faced challenges, particularly with export orders slipping back into contraction. Firms reported ongoing global economic pressures, particularly in the automotive industry, which may hinder broader economic recovery.

Employment trends remained stable, with job creation continuing for the tenth consecutive month, although the pace of hiring was only marginal. Companies noted some spare capacity, as backlogs of work decreased slightly, suggesting a cautious approach to scaling operations amid fluctuating demand.

Inflationary pressures intensified during the month, with input costs rising at the fastest rate since June, driven by increases in wages and energy prices. In response, service providers raised their prices to mitigate the impact of these rising costs, reflecting a challenging environment for maintaining profitability.

Looking ahead, business confidence appears to be improving, with expectations for future growth reaching a four-month high. This optimism is supported by anticipated investments and new customer acquisitions, although concerns about international demand and the implications of advancing technology, such as artificial intelligence, continue to temper overall confidence.

The overall private sector growth, as indicated by the Composite PMI, also saw an uptick, rising to 53.8 from 53.1 in October. With services acting as the primary driver of economic expansion, Italy’s economy is poised to close the year on a stronger note, although inflation and subdued global demand remain critical factors to monitor.