The Bank of Italy’s third-quarter survey of 2,494 industrial and service firms with at least 50 employees found that views of the general economy became less negative, while demand remained positive overall. The balance of assessments of the economic situation improved to minus 39 percentage points from minus 49, although sentiment remained weaker than before the Middle East war. Foreign sales supported growth as domestic sales weakened, and services and construction proved more resilient than industry excluding construction. Firms continued to expect unfavorable operating conditions in the fourth quarter, despite positive forecasts for total and foreign demand and a further, slightly slower increase in employment. Investment plans for 2026 remained expansionary, while investment conditions were still judged unfavorable, particularly by smaller firms. Credit access was broadly stable and expected liquidity remained adequate. The Middle East conflict and closure of the Strait of Hormuz had limited effects on demand but increased input costs, particularly energy costs, for more than four in five firms. Selling prices continued to rise across sectors, and firms expected average increases of 2.3% over the next 12 months, mainly because of commodity costs. Consumer inflation expectations edged down to 2.7% at six months and 2.6% at 12 months, while expectations at two years and three to five years remained at 2.5%.
Bank of Italy survey finds easing economic pessimism but persistent conflict-driven cost pressures
The Bank of Italy’s third-quarter business survey found that economic pessimism eased and demand remained positive, supported by foreign sales, although fourth-quarter operating conditions were still expected to be unfavorable. Middle East conflict effects were concentrated on input costs rather than demand, supporting further selling-price increases. Inflation expectations were broadly stable, at 2.6% over 12 months and 2.5% over longer horizons.