IT: Business and Consumer Confidence

Tue Feb 27 03:00:00 CST 2018

Consensus Actual Previous
Mfg. Conf. Level 109.0 110.6 109.9
Cons. Conf. Level 114.9 115.6 115.5
Bus. Conf. Level 108.7 105.6

Istat's new survey suggests that overall business sentiment improved sharply in February. At 108.9, the headline indicator was 3.1 points above its unrevised January mark and just a couple of ticks short of last October's multi-year high.

The improvement reflected increased optimism in all of the major business sectors with the exception of retail (105.5 after 108.3) which, ominously, deteriorated for a second consecutive month. Manufacturing (110.6 after 109.9) more than reversed January's decline as did services (109.9 after 105.8) while construction (132.0 after 129.2) built on the previous period's gain.

Meantime, consumer confidence was little changed at 115.5, just a tick firmer than at the start of the year but also only 0.9 points short of December's near-2-year peak. Within this, buying intentions recovered most of January's fall but, following their usual seasonal strength, inflation expectations fell back to more normal recent levels.

In sum, today's report makes for upside risk to the upcoming February PMIs (manufacturing due Thursday). However, the weakness of retail sentiment is a worry, warning as it does that consumer buying remains soft despite the latest improvement in household sentiment.

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.