Italy’s retail sales for December 2025 rose by 0.50% month-over-month, according to the latest data from the Sigmanomics database. This figure outperformed the market estimate of 0.40% and reversed November’s sharp 0.50% decline. Over the past 12 months, retail sales have averaged a modest 0.10% monthly increase, highlighting the volatility in consumer spending amid economic headwinds.

Drivers this month

• Holiday season spending boosted non-essential goods sales by 0.30 percentage points.
• Food and beverage retail contributed 0.10 percentage points, reflecting stable demand.
• Automotive and durable goods rebounded, adding 0.10 percentage points after prior weakness.

Policy pulse

The 0.50% gain aligns with the European Central Bank’s (ECB) inflation target zone, suggesting consumer demand is stabilizing without overheating. This supports the ECB’s current pause in rate hikes, as inflation in Italy has moderated to 2.30% YoY from a peak above 3% earlier in 2025.

Market lens

Immediate reaction: The EUR/JPY currency pair strengthened by 0.15% within the first hour post-release, reflecting improved sentiment on Italy’s domestic demand. Italian government bond yields (IT10Y) tightened by 5 basis points, signaling reduced risk premia.

Retail sales are a core macroeconomic indicator reflecting household consumption, which accounts for roughly 60% of Italy’s GDP. The 0.50% MoM increase in December contrasts with the prior three months’ average decline of 0.20%, indicating a potential turning point in consumer spending trends.

Monetary Policy & Financial Conditions

The ECB’s steady policy stance and stable financial conditions have supported consumer credit availability. Lending rates for households remain near 3.50%, unchanged since October 2025, helping sustain retail activity. Inflation’s downward trend has improved real incomes, further bolstering spending power.

Fiscal Policy & Government Budget

Italy’s government continues to maintain a cautious fiscal stance, with a 2025 budget deficit target of 3.80% of GDP. Recent tax incentives for low-income households and subsidies for energy costs have indirectly supported retail consumption, especially in essential goods categories.

External Shocks & Geopolitical Risks

Ongoing geopolitical tensions in Eastern Europe and supply chain disruptions remain downside risks. Energy price volatility could dampen disposable incomes, while trade uncertainties with key partners like Germany and France may affect consumer confidence.

Market lens

Immediate reaction: Italian equities, represented by FTSEMIB, gained 0.70% post-release, reflecting optimism about domestic demand. The EUR/USD pair remained stable, while short-term Italian government bond yields tightened, indicating reduced risk perception.

Looking ahead, Italy’s retail sales trajectory will depend on several factors, including inflation trends, fiscal support, and external risks. We outline three scenarios for the next quarter:

Bullish scenario (30% probability)

• Retail sales grow 0.40–0.60% MoM, driven by sustained consumer confidence and stable inflation near 2%.
• Fiscal stimulus expands, supporting disposable incomes and discretionary spending.
• Geopolitical tensions ease, improving supply chains and energy prices.

Base scenario (50% probability)

• Retail sales grow modestly at 0.10–0.30% MoM, reflecting cautious consumer behavior amid mixed signals.
• Inflation remains near target but volatile energy prices limit spending growth.
• Fiscal policy remains neutral, with no major new stimulus.

Bearish scenario (20% probability)

• Retail sales contract 0.10–0.30% MoM due to renewed inflation spikes or energy shocks.
• Geopolitical risks escalate, disrupting trade and consumer confidence.
• ECB signals tightening monetary policy, increasing borrowing costs.

Overall, the December rebound provides a cautiously optimistic outlook but requires monitoring of inflation and geopolitical developments.

Italy’s December 2025 retail sales data from the Sigmanomics database signals a tentative recovery in consumer spending after several months of weakness. The 0.50% MoM increase outpaces expectations and reverses the prior month’s decline, suggesting improving economic fundamentals. However, the broader macroeconomic environment remains complex, with inflation, fiscal constraints, and geopolitical risks shaping the outlook.

Financial markets responded positively, with Italian equities and bond markets reflecting reduced risk premiums. The ECB’s steady monetary stance and targeted fiscal support have helped stabilize household demand. Yet, vigilance is warranted as external shocks could derail progress.

In sum, retail sales momentum will be a key barometer for Italy’s economic health in early 2026. Policymakers and investors should weigh the balance of upside potential against persistent downside risks.