MNI BRIEF: Italy Inflation Expectations Worsening – BOI Survey

Italian businesses' inflation expectations rose in Q4 2022, according to a survey from the Bank of Italy, as companies with at least 50 workers saw CPI reaching 8.1% over the coming12 months, up from the 6.9% seen in Q3.

Inflation expectations over a two year horizon is 6.7%, but slowing to 5.7% over the 3 to 5 years timeframe. The increase could have been directly influenced by the pick-up in Italy's harmonized rate in the last few months of 2022, the BOI survey notes. Even with the sharp rise in expectations, “the dynamics of the prices charged by businesses should remain sustained in the next 12 months”, albeit decreasing in both construction and manufacturing sectors.

The increase in selling prices will likely slow in the coming year in both sectors (to 4.1% from 6.1% in manufacturing and construction 5.3% from 6.5%), but rise in services (3.9% from 3.7%). The ECB continues to monitor prices closely, with the expected strength in services inflation -- a key driver of core price rises -- an ongoing concern. (MNI SOURCES: ECB Doves Eye Smaller Hikes As Inflation Falls)