Italian September confidence setback points to a softer autumn
Lead — The recent decline in Italian consumer and business confidence signifies a notable economic setback that could affect currency stability in the eurozone. Per the full note from ing-think, consumer confidence dipped significantly from 94.5 to 91.2 in September, while business sentiment also dropped from 97.0 to 95.9. These figures highlight an escalating sense of caution among both consumers and businesses, driven by persistent inflationary pressures. This situation suggests that the outlook for the euro could weaken unless further evidence of resilience emerges, particularly in the labor market.
What the desk is arguing
The desk views the recent downturn in Italian confidence indicators as a precursor to a softer economic environment this autumn. Per the full note from ing-think, the consumer confidence index has not only fallen significantly but also reversed previous gains, reflecting heightened sensitivity among households to economic uncertainties and inflation pressures.
In the business realm, the decline in sentiment appears broad-based, particularly impacting sectors like construction and services, which shifted priorities as economic conditions become less favorable. The 1.3-point autumn drop in the consumer index indicates a clear weakening sentiment, suggesting traders should remain vigilant about potential spillover effects on the euro.
Where it sits in our coverage
Our consensus target for EUR/USD is set at 1.075, with a range extending from 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar-26) - bofa: 1.04 (Mar-26)
This pessimistic outlook on Italian consumer and business confidence aligns with broader market sentiment that has leaned bearish, especially given the uncertainty ahead. The desk's position leans towards the lower end of the consensus range, primarily reflecting concerns raised by the latest economic data.
How other firms see it
A range of firms echoes concerns on EUR stability, notably jpmorgan which has a moderately bullish target, while bofa diverges significantly, leaning towards a more negative outlook for the euro. This divergence emphasizes the lack of consensus on the euro's performance amidst mixed economic signals.
Traders should closely monitor related currency pairs like EUR/GBP and EUR/JPY, as they offer insight into broader market expectations that might react to similar shifts in confidence and economic performance.
What the calendar says
No significant events are currently on the upcoming calendar, leading to a period of consolidation before markets react to future developments in Italian economic data.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Consumer confidence in Italy fell from 94.5 to 91.2 in September.
- 02Business confidence declined from 97.0 to 95.9, highlighting a broad uneasiness.
- 03Economic indicators suggest Italian households are vulnerable to inflation.
- 04Caution is warranted regarding the euro's stability as sentiment deteriorates.
Market implications
Traders should be vigilant around the 1.075 level as the EUR/USD could face downward pressure if sentiment continues to deteriorate. Upcoming Italian economic data releases may provide further insight into shifts in consumer behavior and spending patterns.
Risks to this view
A significant turnaround in consumer sentiment could invalidate this bearish outlook. If evidence of strong labor market resilience leads to improved confidence levels, it would likely bolster the euro's position against major currencies.
Older quick take Quick take Published 10:00 Italy Italian September confidence setback points to a softer autumn Consumer confidence fell sharply in September, while business sentiment also weakened as renewed caution in services and construction outweighed a modest improvement in manufacturing Worsening confidence indicators suggest Italians remain sensitive to uncertainty and pressure on purchasing power The consumer confidence index, published by the Italian National Institute of Statistics (ISTAT), dropped to 91.2 in September from 94.5 in August, reversing the gains achieved in the previous two months. The fall is sizeable and suggests that households remain sensitive to uncertainty and pressure on purchasing power. ISTAT cautioned that the September movement was also partly affected by changes in the organisation of the survey network, so the month-to-month decline should not be read mechanically.
On a positive note, consumers signalled declining concerns about future unemployment, suggesting that resilience in the labour market could still help weather the shock of higher inflation on purchasing decisions. Business confidence declined from 97.0 to 95.9, ending a three-month run of increases. The sector picture was uneven.
Manufacturing confidence rose to 91.9 from 90.2 as firms reported better order books, although production expectations softened. Elsewhere, the signals were clearly weaker. Construction confidence fell to 97.5 from 102.8, dragged down by the residential and specialised works components.
The gain in the civil engineering component, more related to EU recovery fund investments, signals that two months after the formal deadline of the plan, a tail effect is still in place. Confidence fell in both markets: services from 99.4 to 96.9 and retail trade from 106.5 to 104.5. In services, both current affairs and orders weakened but expected orders improved in the tourism domain.
In retail, assessments of current sales improved, but expectations for future sales deteriorated sharply. September’s confidence release is a warning that the improvement in domestic demand remains fragile. The rebound in manufacturing orders is encouraging and may point to some stabilisation in industrial activity, but weaker expectations across consumer-facing services, retail and construction argue against a strong acceleration in growth.
The sharp fall in household confidence could translate into more cautious discretionary spending and a higher propensity to save, even if employment and real-income fundamentals remain supportive. Overall, the survey is consistent with subdued near-term GDP growth rather than a broad contraction, with the balance of risks tilted to the downside for private consumption in the final quarter. GDP Eurozone 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.
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