Finance
Italy Service Sector Contracts for First Time in 16 Months, Survey Shows
Published by Global Banking & Finance Review®
Posted on April 7, 2026
2 min readLast updated: April 7, 2026
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Italy’s service sector slipped into contraction in March—the first dip in 16 months—as both domestic and foreign demand weakened and input costs surged amid the Middle East conflict.
Italy's Service Sector Contracts in March as Demand Drops and Costs Surge
March 2025 Service Sector Performance and Economic Impact
Service Sector Contraction and PMI Data
ROME, April 7 (Reuters) - Italy's service sector contracted in March for the first time in 16 months, a business survey showed on Tuesday, as domestic and foreign demand declined and costs surged in connection with the conflict in the Middle East.
S&P Global Markets' Services PMI Business Activity Index dropped steeply to 48.8 last month from 52.3 in February, marking the first month since November 2024 below the 50.0 threshold that separates growth from contraction.
Decline in New Business and Export Orders
The new business subindex dropped to 48.3 from a previous 52.7, and the indicator for new export business also posted 48.3, down from 50.4.
Rising Input Costs
Increased raw material, energy and fuel prices led to a jump in the indicator of input costs to 64.6, its highest level in more than three years.
Expert Commentary on Sector Fragility
"The Italian services economy showed signs of fragility in March, as challenging external conditions due to war in the Middle East weighed on demand and activity," said S&P Global Markets economist Eleanor Dennison.
"The sector contracted at the strongest pace in nearly two-and-a-half years, marking just the fourth monthly fall in output seen over this period," Dennison added.
Manufacturing Sector and Composite PMI Overview
Manufacturing Sector Input Costs
The sister PMI survey for Italy's smaller manufacturing sector also showed input cost inflation accelerating in March to a 3-1/2-year high.
Composite PMI and Economic Outlook
The composite PMI, combining manufacturing and services, fell in March to 49.2 from 52.2, signalling economic contraction for the first time since January 2025.
Government Growth Projections
The Italian government this month is expected to cut its 2026 economic growth estimate to around 0.5% from the 0.7% projection it made last autumn.
(Reporting by Gavin Jones; Editing by Hugh Lawson)
Key Takeaways
- •S&P Global Services PMI fell to 48.8 in March from 52.3 in February, signaling contraction for the first time since November 2024; new business and exports also declined sharply.
- •Input cost pressures—especially from raw materials, energy and fuel—hit their highest level in over three years, with the input-cost index rising to 64.6.
- •The composite PMI (manufacturing plus services) dropped to 49.2, marking overall economic contraction; the government is set to lower its 2026 growth forecast to around 0.5 %.
Frequently Asked Questions about Italy service sector contracts for first time in 16 months, survey shows
1Why did Italy's service sector contract in March?
Italy's service sector contracted due to falling domestic and foreign demand, as well as rising input costs fueled by conflict in the Middle East.
2What was the Services PMI for Italy in March?
The Services PMI Business Activity Index dropped to 48.8 in March, falling below the 50.0 threshold that separates growth from contraction.
3How did input costs affect Italy's service sector?
Input costs increased sharply due to higher raw material, energy, and fuel prices, reaching their highest levels in over three years.
4What is Italy's composite PMI and what does it signal?
Italy's composite PMI fell to 49.2 in March, signaling economic contraction for the first time since January 2025.
