ROME (Reuters) – Italy’s services sector grew in June for a sixth month running, albeit at a slower pace than in May, with higher interest rates weighing on sentiment in the euro zone’s third largest economy, a survey showed on Wednesday.
HCOB Global’s Purchasing Managers’ Index (PMI) came in at 52.2 last month, down from 54.0 in May. It was above the 50 level that separates growth from contraction, but lower than expected, with a Reuters survey of 17 analysts pointing to a figure of 53.0.
“It could well be that the pace will continue to slow in the coming months, as recession fears are also gradually spreading in Italy’s tertiary sector,” said Tariq Kamal Chaudhry, an economist at HCOB.
“Higher interest rates are also cited as a burdening factor,” he said. The European Central Bank raised euro zone interest rates to their highest level in 22 years last month and said a ninth consecutive hike was all but guaranteed in July.
All the sub-indices in the PMI survey eased, including the new business indicator, which dipped to 52.9 from a previous 55.4, while business expectations fell to 62.3 from 64.2 and the reading for prices charged hit 51.4, down from 54.1.
The PMI for Italy’s smaller manufacturing sector, released on Monday, came in at 43.8 in June from 45.9 in May – its weakest reading in more than three years.
The composite Purchasing Managers’ Index combining services and manufacturing stood at 49.7 in June against 52.0 in May — the first time it has dropped beneath the all-important 50 level this year, the survey showed on Wednesday.
The Italian Treasury believes that growth in the service sector will be enough to offset the slowdown in manufacturing in the next few months, officials have said.
Rome recently raised its forecast for 2023 full-year economic growth to 1.0% from 0.6%, however Prime Minister Giorgia Meloni said on Monday the final figure might be as high as 1.2%.
(Reporting by Crispian Balmer; Editing by Susan Fenton)
