Italian business confidence softened slightly in November, adding to an array of weak data in the fourth quarter, although the headline data obscured a somewhat brighter outlook from some sectors of the economy.

Business confidence slipped to 103.4 in November, according to Istat, from an unrevised 103.9 a month earlier, touching the lowest level since April of 2021, when the country was reeling from draconian Covid lockdowns.

But manufacturing confidence improved to 96.6 topping the consensus estimate of 96.0 from an upwardly-revised 96.1 in October. Production expectations also rose, suggesting that manufacturing activity could continue to improve in months to come.

Consumer confidence rose markedly, to 103.6 from 101.6, far exceeding the consensus forecast of 102.0. All components of the index recorded increases, with the personal climate subset jumping to 101.2 from 98.6.

With consumer and manufacturing sentiment improving, it was the market services and construction sectors that accounted for the decline in the broader business confidence index.

Still, the latest data may provide some cheer for the Italian government, after the economy contracted by 0.4 percent in the third quarter. Revised gross domestic production data are due on Friday.

After a recent spate of weak eurozone data, markets appear to be pricing in as many as four rate cuts next year, with some economists forecasting a reduction as early as next summer. That's despite Bundesbank President Joachim Nagel's insistence earlier this week that it's too early to even begin envisioning a lower rate environment. The Bank's governing council left the door open to further rate hikes at their October rate-setting meeting, according to minutes released last week.

The latest confidence data take Italy's RPI to minus 27 and the RPI-P to minus 8, meaning the economy is underperforming market expectations, albeit to a lesser extent than in past weeks.

Sentiment in manufacturing is seen unchanged at 96.0 while consumer confidence is expected to edge up from 101.6 to 102.0.

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.