IT: Business and Consumer Confidence

February 24, 2017 04:00 CST

Consensus Actual Previous Revised
Mfg. Conf. Level 104.6 106.3 104.8 105.0
Cons. Conf. Level 109.0 106.6 108.8 108.6
Bus. Conf. Level 104.0 102.5 103.3

Overall business confidence improved in February according to the new Istat survey. At 104.0, the headline sentiment indicator was up 0.7 points from a slightly firmer revised January print and at its best mark since December 2015.

The rise reflected a more optimistic assessment in three of the four major sectors. Manufacturing saw a 1.3 point gain to 106.3, a multi-year high, retail jumped 5.1 points to 108.5 and services edged a tick stronger to 105.5. The only category not to make any progress was construction although morale here at least held flat (123.9).

However, the generally positive results for industry were not mirrored in the consumer area where sentiment deteriorated. A 2 point decline to 106.6 followed a 2.2 point drop at the start or the year and left the measure at its lowest level since last September. Buying intentions were pared back and inflation expectations unwound half of the previous period's increase.

In sum, today's report is mixed. On the bright side confidence in industry has clearly improved significantly since the middle of last year but it is hard to see this being sustained without a more positive consumer sector. Weakness in the latter, no doubt in part due to rising political uncertainty, could well stifle any would-be acceleration in Italian economic growth over coming months.

The Italian statistics office (Istat) conducts business and consumer confidence surveys over the first fifteen and ten working days of each reference month respectively. These provide information about current and expected developments in key sector variables. The largely qualitative results are synthesized for each survey into a single number that provides an overall measure of sentiment. Business confidence reflects the combined results of separate surveys covering manufacturing, retail, construction and services.

If investors want to know how the business or consumer sectors are performing as they evaluate their investment decisions, they can find timely and in depth information in the latest Istat surveys. Although short-term swings can be erratic, changes in trends in confidence can contain very useful information about a sector’s underlying health well in advance of the release of the official data. Moreover, by including some forward-looking components (e.g. manufacturing orders or consumer buying intentions) the Istat surveys can also provide a potential insight into prospective developments.