Wage Costs Noted As An Inflationary Driver In Feb PMI

Italian February services PMI was broadly in line with consensus at 52.2 (52.3 cons, 51.2 prior), the highest since June 2023.

• As in Spain, salary costs were again noted as a driver of inflationary pressures. Underscoring the ECB's concern with services inflation stickiness (most recently verified in the February flash inflation print).
• Nonetheless, Spain and Italy continue to outperform French/German counterparts in both survey data and hard data (e.g. Q4 GDP).
• Once again, bond markets saw a limited reaction to the release.

Key notes from the release:

• "The increase in activity reflected a combination of new client introductions and also a rise in demand across the Italian service sector economy".
• "Companies reported a stabilisation in new work from abroad, having registered declines in the previous six months".
• "The degree of positive sentiment reached its highest since April 2022. Survey respondents noted investment plans, new projects and attracting new clients as the key drivers of confidence".
• "The uplift in confidence fed into firm's hiring decisions in February".
• "Inflation related to operating expenses remained elevated"…"Greater fuel, utility, raw material and salary costs were among those mentioned by firms as driver of inflation".