Overall business confidence worsened quite sharply in mid-quarter. At 95.8, the overall sentiment gauge fell more than 2 points versus a weaker revised January to hit a 3-month low. The decline makes for some downside risk to the February PMI data.

Confidence in manufacturing (87.3 after 88.1) unexpectedly deteriorated, a 0.8 point drop almost reversing all of January's smaller revised 0.9 point bounce. Outside of December 2023, the measure now stands at a multi-year low. Elsewhere, it was similarly gloomy news with confidence falling particularly steeply in retail trade (100.6 after 106.3) and also losing ground in both services (100.2 after 102.5) and construction (104.4 after 107.0).

However, at the same time, consumer confidence (97.0 after 96.4) improved further, extending the trend upswing that began after hitting a low of 91.1 in October. The February print matched the market consensus and is the highest since June last year.

Overall, today's update paints a soft picture of sentiment in most areas of the economy. Even so, while an RPI of minus 9 points to a modest degree of underperformance by economic activity in general, at 8 the inflation-adjusted index (RPI-P) shows the real economy still running a little hotter than forecast.

Confidence in manufacturing is seen improving from January's 88.3 to 88.8 and in the consumer sector from 96.4 to 97.0.

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.