Italy Services PMI Nears Stabilization as Middle East Tensions Push Costs Higher

Italy’s service sector faced mounting cost pressures in April 2026, with businesses reporting the sharpest rise in input prices in more than three years amid ongoing instability in the Middle East. According to the latest HCOB PMI survey released on Wednesday, inflationary pressures continued to weigh heavily on companies, even as overall business activity showed signs of improvement.

The input cost inflation index in Italy’s services sector climbed to 65.5 in April from 64.6 in March, reaching its highest level since February 2023. Analysts linked the increase largely to geopolitical tensions tied to the Iran conflict, which has disrupted supply chains and added uncertainty across European markets.

Despite rising costs, Italy’s headline Services Purchasing Managers’ Index (PMI) improved to 49.8 in April from 48.8 in March. While the reading remained slightly below the 50-point threshold that separates economic expansion from contraction, it performed far better than market expectations. Economists surveyed by Reuters had forecast a weaker reading of 47.6.

S&P Global economist Eleanor Dennison said uncertainty surrounding the Middle East conflict continued to impact customer demand while simultaneously driving up operating expenses for businesses. Companies struggled to transfer higher costs to consumers due to already weak demand conditions, leading to tighter profit margins across the sector.

Dennison warned that if the pressure on margins continues, businesses may reduce hiring activity and delay investments, potentially affecting Italy’s broader economic outlook.

Italy’s manufacturing sector also experienced rising inflationary pressures, with factory input costs reaching their highest level in nearly four years. However, the country’s composite PMI index, which combines both manufacturing and services activity, rose to 50.5 in April from 49.2 in March, signaling a return to modest overall economic growth after the previous month’s contraction.