Italy's Service Sector Strengthens in October

ROME (Reuters) – Italy's service sector regained strength in October after almost stagnating in September, according to a survey released on Wednesday, buoyed by a surge in new domestic business.

The HCOB Purchasing Managers' Index (PMI) for Italian services reached 52.4 last month, up from 50.5 in September, maintaining a position above the critical level of 50 that indicates growth over contraction.

This reading surpassed the median forecast of 50.5 from a Reuters survey of twelve analysts and marked an end to a six-month slowdown in growth that peaked at 54.6 in March.

"The recent growth in Italy's service sector is primarily fueled by a rise in domestic demand," stated HCOB economist Jonas Feldhusen, highlighting that a subindex measuring new export business has lingered below the 50 level for a third consecutive month.

Conversely, the overall new business gauge increased to 51.9 from 49.3 in September. However, the employment index dipped to 49.9 last month compared to 50.9 previously.

A parallel survey revealed that Italy's smaller manufacturing sector contracted for a seventh month in October, with a more pronounced decline than the prior month, indicating persistent issues in other areas of the economy.

According to national statistics bureau ISTAT, Italian gross domestic product stagnated in the third quarter relative to the previous three months, falling short of forecasts and clouding the growth outlook.

Yet, there is a slight beacon of hope as the composite PMI, which combines services and manufacturing, rose to 51.0 in October from 49.7 the prior month.

Feldhusen noted, "The HCOB Composite PMI offers cautious optimism as we enter the fourth quarter, having edged back above the growth threshold, primarily driven by demand in the services sector."

He concluded, "This underscores a distinct bifurcation within the Italian economy."