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Services activity in Italy rose for the first time in 22 months in October, as new orders increased and business confidence remained high, a survey by Markit Economics and ADACI showed Wednesday.
The seasonally adjusted Business Activity Index rose to 52.2 from 48.5 in September. A reading above 50 indicates expansion, while a reading below 50 signals a contraction. The index moved to the expansion zone for the first time since November 2007, reversing 22 months of contraction, the longest period of decline in survey history.
New orders increased for the first time in two years, reflecting higher spending by Italian firms. However, Markit said orders were won on the back of fierce discounting by competitors. Backlog of work fell further at a faster rate.
Meanwhile, fierce competition also forced down output charges, for the 13th consecutive month. However, input prices rose for the third consecutive month on rising staffing costs. Firms responded to higher wage costs through the reduction of employment. This marks the 13th month employment has fallen.
"While latest data paint a more positive picture of the Eurozone's third largest economy, they in no way guarantee a sustainable upturn. New contracts in the manufacturing and service sectors continued to be won on the back of strong discounting, which cannot continue indefinitely, while backlogs were again lowered to support activity, " Andrew Self, economist at Markit noted.
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