Italian service sector growth slows in February, with rising costs putting pressure on the industry

Investing.com – According to the HCOB Italy Services PMI data released on Wednesday, Italy’s service sector has expanded for the 15th consecutive month in February, though the growth rate has slowed compared to the previous month.

The HCOB Italy Services Business Activity Index fell from 52.9 in January to 52.3 in February. Despite the decline, the reading remains above the 50 mark that separates expansion from contraction and is at a relatively high level historically.

Service providers indicated that increased demand, new customer acquisitions, and the Milan-Cortina Winter Olympics were key factors driving activity growth this month.

New business volume increased in February, but at a slightly slower pace than in January. Export orders grew for the first time in four months, with sales increasing in international markets such as the UK, US, and Middle East. The overall improvement in export performance was modest.

Uncompleted business volume saw little change in February. The slight decrease in backlogs was the weakest in the current 12-month downward trend, remaining at levels seen in June and July 2025.

Service sector employment grew for the 13th consecutive month in February. The workforce increased at the fastest rate in seven months, though overall hiring activity remained moderate.

Input costs rose sharply in February, reaching a three-month high and exceeding series trends. Respondents cited wage pressures as a key driver, along with rising transportation, energy, fuel, and business service costs.

Output prices increased for the 46th consecutive month in February. About 15% of companies raised charges, while 5% offered discounts. The inflation rate reached a seven-month high.

Service providers’ expectations for activity over the next 12 months improved in February. Optimism levels are roughly in line with the 2025 average but still below historical trends. Companies expressed hopes for increased new business, partly due to winning new clients.

The HCOB Italy Composite PMI Output Index, which combines manufacturing and services data, rose from 51.4 in January to 52.1 in February. This indicates the strongest growth in three months, with manufacturing recording its first increase alongside services since November 2025.

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