Services PMI Above Consensus, Inflation and Employment Components Rise

Italian services PMI for November was above expectations in contrast to its Spanish counterpart, printing at 49.5 (vs 48.3 cons; 47.7 prior). Similar to Spain, both prices and employment components showed firmness against a weakening demand backdrop. Key notes from the release are:

• "Inflationary pressures regained some momentum in November"…"hikes in energy, fuel, and raw material prices were said to have driven inflation". This prompted some pass-on "of the inflationary burden on to customers through greater selling prices".
• "The contraction in backlogs was aided by a return to workforce expansion in November. Italian service providers increased payroll numbers after a month of cuts seen in October, albeit fractionally".
• The release noted that "jobs creation in part reflected some confidence about the future".
• "Firms remained concerned regarding ongoing geopolitical tensions and the continuation of muted demand conditions, hence scaling-back their activity levels".
• "Firms blamed the downturn in new orders on high interest rates and reduced purchasing power at customers, as the cost of borrowing remained notably elevated". Orders from abroad also fell, with firms citing "demand weakness and geopolitical tensions".