Italy's economy is showing signs of resilience as both consumer and service sector confidence rebounded in May, despite persistent challenges in the manufacturing and construction sectors. ING's latest analysis suggests decelerating, yet still positive, GDP growth in the second quarter of 2025, following a surprisingly strong first quarter.
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According to data from Istat, May brought a notable uptick in confidence across most segments, particularly among consumers and service providers. 'The May release fits this picture,' ING's Paolo Pizzoli notes, referencing the volatility of Italian confidence indicators in the face of shifting US tariff policies and their direct and collateral effects.
Solid rebound in consumer confidence
'Consumer confidence gained eight points, more than compensating for April's fall,' the report states. This reflects growing optimism regarding both the current and future state of the economy, alongside reduced concerns about unemployment. 'The relevant indicator [for future unemployment] is now back down to January's level.' While there was a marginal improvement in intentions to purchase durable goods, cautious saving behaviour continues to act as a drag on private consumption.
Services sector leads the way
The most significant boost was observed in services, where confidence rebounded from April's three-point decline. 'The improvement was broad-based, but particularly marked for tourism services… also solid in transport services and services to businesses.' ING highlights this as vital support for Italy's economy, which continues to lean on services amid an extended manufacturing downturn.
Manufacturing still stagnant
Confidence in manufacturing remains muted, with only marginal improvements in orders and production expectations. ING observes that 'it's too little to call for a restart of the inventory cycle' and notes that 'lingering uncertainty surrounding tariff developments' continues to dampen prospects.
Construction confidence uneven
The construction sector showed mixed signals. 'Confidence rebounded among house builders… and declined among infrastructure producers,' despite ongoing EU-funded recovery investment. ING stresses that 'the final contribution of construction investment to 2025 GDP growth remains highly uncertain.'
Overall, ING concludes that 'the necessary conditions remain for decelerating but still positive GDP growth in the second quarter,' bolstered by consumer sentiment and services strength, even as manufacturing and construction remain fragile.
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