• Prior 53.2
• Composite PMI 51.1 vs 52.0 expected
• Prior 52.5

Key findings:

• Sustained, but slightly softer growth in activity and new business
• Employment up at strongest rate for a year as confidence improves
• Service fees rise at a less marked rate despite cost pressures building

Comment:

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

“Italy’s services sector maintained its growth trajectory in June, albeit at a slightly slower pace, with the HCOB Services PMI easing to 52.1 from May’s near one-year high. While the deceleration may raise eyebrows, the underlying dynamics suggest a sector still buoyed by resilient domestic demand and cautious optimism. Business activity and new work continued to expand at rates above historical norms, supported by new service launches and client wins. However, the momentum softened, hinting at a more measured pace of recovery heading into the second half of the year.

“Employment surged at the fastest rate in a year, reflecting firms’ confidence in sustained workloads. Yet, this optimism remains tempered. Business expectations improved to a four-month high, but sentiment is still below long-run averages, shaped by persistent geopolitical and economic uncertainties. Export business remains a weak spot, contracting at the sharpest rate since January, as subdued demand from key European markets and global trade tensions continue to weigh on international sales.

“Input cost pressures intensified, driven by elevated wages and rising energy and raw material prices. Despite this, firms showed restraint in passing on costs, with selling prices rising at a softer pace. This suggests a strategic balancing act: protecting margins without alienating price-sensitive consumers.

“Looking ahead, Italy’s services sector appears stable but cautious. With domestic demand holding firm and financing conditions improving through the ECB’s policy easing, the groundwork for continued expansion is in place – provided external headwinds don’t intensify.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.