Service sector growth in Italy remains marked during July
Staff Writer |
Italy’s service sector growth was sustained during July at a marked pace, despite new orders rising at the slowest rate since October 2016.
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Backlogs subsequently declined slightly, the first time that a fall has been registered for 22 months, with these efforts supported by increased capacity expansion through higher employment.
On the price front, input costs continued to rise markedly, but output charges were cut again.
Business confidence weakened to its lowest level since July 2016.
The headline index from the report, the seasonally adjusted Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – registered 54.0 in July, down slightly from 54.3 in the previous month.
Remaining above the 50.0 nochange mark for a twenty-sixth month in succession, the latest data were indicative of a further rise in activity.
Growth was sustained at a marked level despite the weakest gain in new work for 21 months.
Although there were reports of increased demand, market activity was generally reported to be weaker than earlier than in the year.
Panellists commented that growth had softened in spite of promotional activities and discounts being offered to clients.
Amid reports of competitive market conditions, average output prices charged by service sector companies fell for a sixth successive month.
Margins subsequently remained under pressure as input prices rose again over the month.
Despite easing since June, inflation was again strong with service sector companies reporting that fuel prices were increasing.
A number of firms also added that average wage costs had risen.
Increased labour costs were partly driven by ongoing employment growth, with the latest survey showing a twenty-second successive month of job creation.
Some companies reported that employment rose on the back of positive forecasts for growth.
With capacity increasing, and activity rising at a greater rate than new work, backlogs of work came under pressure in the latest survey period.
Levels of work outstanding subsequently fell in July, the first such decline recorded by the survey since September 2016.
Finally, business confidence remained in positive territory during July amid expectations of sales growth in the coming 12 months, supported by planned new product releases.
However, overall sentiment weakened to its lowest level since July 2016.
General economic uncertainty and worries over credit access were reported. ■