Italy’s headline inflation rate continued its sharp slowdown, reaching an annual figure of just 1.2% in October. This deceleration surpassed analysts’ expectations and marked a decline from the previous month’s rate of 1.6%. The surprising decline marks an important shift in the country’s economic landscape and serves as a bellwether to important trends reshaping what consumers pay for everyday items.
Italy’s core inflation rate, which excludes the volatile categories of energy and food, was unchanged at 2%, showcasing the underlying strength even as headline numbers have fallen sharply. Moreover, goods prices experienced a pronounced deceleration, falling to a mere 0.2% y-o-y. Service inflation held firm at 2.6%. That means the gap remains narrow at 0.4 percentage points. This gap is a stark representation of the unique pressures experienced in every sector of our economy.
The energy component is still a very important factor influencing Italy’s inflation path. This recent slowdown is largely due to past volatility in gas and electricity costs. This establishes a base effect that plays a role in the present circumstance as well. Many analysts are forecasting that this base effect is going to be with us for some time to come. So too will it push back against the persistent anchoring of inflation expectations.
Additionally, one of the latest business turnover intentions surveys for the services sector showed a softening in price change intentions among businesses. This feeling is in line with what we’re hearing from consumers. It hasn’t gained much momentum, particularly in the services industry. As seen in the October data, this represents a larger trend toward moderating inflation pressures. This means that consumers will not face any short-term resulting price increases.
Future average headline inflation forecast for Italy in 2025 has been decreased from 1.7% to 1.6%. This change indicates a far more positive outlook on getting inflation under control. It shows that policymakers should not be terrified to act if the economic conditions demand strong intervention.