The Italian economy looks to have remained in the doldrums at the start of the fourth quarter, if the latest confidence figures translate into weak output.

Business confidence declined to 103.9 in October, according to Istat, from 104.9 a month earlier, touching the lowest level since April of 2021.

Manufacturing confidence also sagged, falling to 96.0 in line with the consensus forecast from 96.4. That's the lowest level since November of 2020, when the country was still reeling from the aftermath of Covid lockdowns. Despite the decline, industrial firms reported a slight recovery in the outlook for future production.

Consumer confidence fell sharply to 101.6 -- the lowest level since January, and well below the consensus forecast of 105.2 -- from 105.4 in September.

The data will provide little cheer for the Italian government, with the economy forecast to lag most of its eurozone peers this year after a 0.4 percent contraction in the third quarter.

Another poor performance in the closing months of the year may raise eyebrows at the European Commission, with Italy unveiling a tax-cutting budget earlier this month, despite a budget deficit expected to hit 5.3 percent of gross domestic product this year. That's pushed Italian bond yields toward a 200-basis point spread of German yields, a level considered dangerous to investors.

However, spreads narrowed on Thursday after the European Central Bank opted to keep its benchmark rates on hold. Nonetheless, ECB President Christine Lagarde amplified her call for eurozone governments to rein in potentially inflationary fiscal stimulus.

The latest confidence data take Italy's RPI to minus 4 and leaveg the RPI-P at zero, a sign that economy is performing in line with market expectations.

Confidence in manufacturing is expected to slip from 96.4 in September to 96.0 this month. In the consumer sector, confidence is seen edging down from 105.4 to 105.2.

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.