Bank of Italy: Businesses Expect Rising Inflation. While Duties and New Jobs... - Trends

Thirty-two percent of manufacturing companies and 12 percent of service companies reported negative repercussions attributable to the announcements and application of US tariffs. According to the survey conducted by the Bank of Italy between May 19 and June 12 on Italian industrial and service companies with at least 50 employees, in the second quarter of the year compared to the previous quarter both assessments of the trend of current sales, especially on the domestic market, and the outlook for short-term operating conditions improved, which, however, are affected by the negative effects of the tariffs imposed by the United States. The impact, explains the Bank of Italy, was primarily felt indirectly for service companies (78 percent of those reporting effects), while for manufacturing companies the direct channel of orders from US companies was slightly more prevalent (54 percent). The outlook remained more solid among construction companies, among which the share that expects to benefit from the measures connected with the PNRR in 2025 remained close to 60 percent.

Bankitalia: positive expectations for employment for businesses

Business expectations for employment remain positive for the third quarter, particularly among construction companies. According to the survey conducted by the Bank of Italy between 19 May and 12 June among Italian industrial and service companies with at least 50 employees, employment is expected to continue to expand in the third quarter: the balance between companies that reported forecasts of an increase in the workforce and those that anticipated a contraction stood at 15 percentage points (from 16 in March). The outlook remained more favorable in construction (25 percentage points, from 23) than in industry excluding construction (stable at 10 points) and services (17 points, from 20). The expected trend for hourly wages of employees remained substantially unchanged compared to the previous quarter.(

Bank of Italy: Businesses Expect Inflation to Be Close to 2%

Consumer price inflation expected by businesses rose slightly across all forecast horizons, settling at just under 2 percent at 6, 12 and 24 months (from 1.8, 1.8 and 1.9 percent, respectively) and at 2.1 percent at 48 months (from 1.9). This was revealed by the survey conducted by the Bank of Italy between 19 May and 12 June among Italian industrial and service companies with at least 50 employees. Expectations were confirmed to be homogeneous across sectors and across companies of different sizes, as well as across different areas of the country. In the second quarter, the Bank of Italy also reports, growth in sales prices charged by companies remained substantially stable in industry (at 1.6 percent, compared to the previous year) and in services (at 1.9). The growth of price lists in the next 12 months is expected to remain unchanged compared to the previous survey in all sectors (1.6 percent in industry, 1.8 in services and 3.4 in construction). The main factors that have affected the price dynamics are the increase in the cost of labor and that of raw materials, both, however, attenuating compared to the previous survey. At the same time, signs of greater competitive pressure are emerging. In fact, 34 percent of manufacturing companies and 24 percent of service companies expect an increase in the supply of Chinese products in the markets in which they operate as a result of US trade policies, with consequent downward pressure on prices. Companies that operate only on the domestic market have perceived this phenomenon with less intensity: four fifths of companies do not expect a significant impact.

Bankitalia: Businesses' assessments of economic situation improve

The assessments of Italian industrial and service companies with at least 50 employees on the general economic situation in the second quarter of the year improved but remained unfavorable overall. According to the survey conducted by the Bank of Italy between May 19 and June 12, in the second quarter the balance between assessments of improvement (expressed by 6 percent of companies, a level slightly higher than that of the previous survey) and worsening of the country's general economic situation stood at -20 percentage points, from -30 in March (table 1), proving less negative in all sectors of activity, size classes and geographical areas. Assessments of investment conditions were also less unfavorable. Companies reported expectations of slightly stronger investment growth in 2025 than those recorded last spring. Assessments regarding access to credit improved marginally in the second quarter.

The balance between favorable and unfavorable assessments of investment conditions improved to -12 percentage points, from -17, returning to the values ​​of the end of last year, remaining negative in all sectors of activity. The improvement affected service companies to a greater extent, where the balance rose to -10 points from -17, and smaller companies. Overall, fixed investment spending is expected to expand in 2025, with the balance between assessments of an increase and a decrease rising to 17 percentage points from 13 in March. In construction, the increase in the balance was 8 points (to 18), while more modest improvements were recorded among service companies (to 18, from 14) and industry excluding construction (to 13, from 11). Access to credit conditions improved in the second quarter for 8 percent of companies, compared to 6 percent who reported a deterioration (the lowest value since the end of 2021). The balance between positive and negative responses increased significantly among construction companies (to 3 points, from -3) thanks to the sharp increase in the assessments of the most active companies in the non-residential sector and despite the worsening for the remaining companies in the sector. Expectations for the next quarter remained substantially in line with the previous survey, with prevailing assessments of stability