Italian confidence data sends mixed signals in June
The latest Italian confidence data presents a nuanced picture of consumer and business sentiment, with pressures from geopolitical tensions possibly weighing on economic outlook. Per the full note from ing-think, the June consumer confidence index dipped to 92.4, down from 93.4 in May, reflecting concerns over household finances and future employment. Despite a marginal resilience reported among manufacturers, the broader sentiment suggests a consumer base poised for prudence rather than exuberance. Given these metrics, market participants should remain cautious as they await subsequent readings and further insights into the fallout from recent global events.
What the desk is arguing
The desk interprets the Italian confidence data as indicative of an economy facing significant headwinds, particularly from consumer apprehension. Per the full note from ing-think, the decline in June's consumer confidence to 92.4 serves as a warning signal regarding household spending resilience amidst ongoing geopolitical turbulence.
This data arrives at a critical juncture, as peak consumer spending in the first quarter appeared to be an anomaly. The deterioration in consumer sentiment, particularly reflected in rising saving intentions alongside declining purchase plans for durable goods, underscores the vulnerabilities that could hinder GDP growth in the second quarter.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a projected range of 1.04 to 1.12. Specifically, firms forecast the following by Dec-26: - jpmorgan: 1.10 - bofa: 1.04
While jpmorgan aligns with our view, the target from bofa sits at the lower end of the spread, reflecting diverging perspectives on Italian economic robustness.
How other firms see it
Several firms, including jpmorgan and others in our aligned group, seem to agree on the overall cautious outlook for the eurozone and the implications for the EUR/USD trajectory. Conversely, firms like bofa are pushing back against this view, suggesting more pronounced economic struggles lie ahead.
Key indicators to monitor alongside this sentiment include the trajectory of EURO area inflation and central bank reactions, which will be critical for establishing future currency direction.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Consumer confidence in Italy fell to 92.4 in June, indicating rising economic concerns.
- 02Household vulnerability and cautious spending behaviors are likely to impact GDP growth forecasts.
- 03The diverging outlook from firms highlights uncertainty around the EUR/USD trajectory.
- 04Geopolitical risks, particularly around energy prices, remain a key consideration for market positioning.
Market implications
Watch for potential price action around 1.075 in EUR/USD as it reflects the current consensus. The market's response to subsequent data releases will be critical in shaping sentiment and positioning leading into the second half of the quarter.
Risks to this view
Any unexpected positive shifts in consumer confidence or a resolution to geopolitical tensions could invalidate the current bearish sentiment. Additionally, if European Central Bank policy pivots towards a more aggressive tightening stance, it may also alter the trajectory of the euro significantly.
Older quick take Quick take 12:54 Italy Italian confidence data sends mixed signals in June Data mostly collected before the signing of the US-Iran deal still point to consumer vulnerability and mixed improvements among businesses. A clear slowdown in GDP growth in the second quarter seems highly likely Italians are proving to be fairly downbeat about the general economic situation and their household balance sheet Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Paolo Pizzoli Senior Economist, Italy, Greece The Italian economy started the year relatively strongly, but April and May confidence data pointed to a slowdown, albeit still in positive territory. June’s reading of 92.4 (from 93.4 in May) appears to confirm this trend.
Notably, most June data were collected before the US-Iran Memorandum of Understanding, meaning its full impact on confidence is likely to show up in July. Vulnerable consumers point to prudence in consumption Private consumption had been the main positive surprise in the first quarter GDP release, and subsequently the most vulnerable component to the side effects of the war in the Middle East on energy prices and via headline inflation. After catching up some ground in May, consumer confidence partially backed down in June.
Consumers are proving more downbeat about the general economic situation and their household balance sheet. Expectations about future unemployment are stable, but this cannot prevent a more prudent attitude, as higher intentions to save match with sharply declining intentions to purchase durable goods. The concurrent increase in confidence among retail businesses might suggest a temporary shift towards non-durables consumption.
Manufacturers relatively resilient but orders remain subdued Manufacturers were relatively resilient to disruptions related to the war in the Middle East in April and May. June data points to stable production levels and a marginal improvement in expected production, likely to relate to declining stocks of finished products rather than to orders, whose indicator marginally edged down. The relative resilience in manufacturing goods suggests that this sector might resume its gradual recovery path if US-Iran negotiations progress well and energy prices converge towards pre-war levels, helping contain the cost base.
Confidence in construction still reflecting recovery plan timeline The improvement in confidence in the construction sector is driven by specialised works and civil engineering, the latter being likely helped by the imminent deadline for many investments foreseen by the EU-funded recovery plan. On the residential front, the situation seems to be stabilising, as the distorting effect of the very generous "Superbonus" tax incentive finally fades away. Service confidence only slightly up, thanks to tourism In April and May, confidence in the service sector had unsurprisingly recorded two sharp falls, highlighting the vulnerability of the sector, and particularly of the tourism component (just think of gasoline and jet fuel prices) to the Middle East war.
The small recovery of services confidence in June, mostly backed by a sharp rebound in the tourism component, provides only limited comfort. Over the second quarter, the service sector has likely been an underperformer. A GDP growth deceleration in the second quarter is now on the cards All in all, it is reasonable to assume that second quarter Italian GDP growth should have marked a clear deceleration from the first quarter, possibly avoiding the contraction territory.
At the heart of it should be a temporary slowdown in private consumption. If the normalisation of oil flows through the Strait of Hormuz proceeds without bumps and energy inflation decelerates, a gradual recovery over the second half of the year could materialise. On the back of a strong start to the year and of the new reduced inflation profile, we have slightly upgraded our forecast for average 2026 GDP growth to 0.8%.
Italy GDP Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take
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