The latest HCOB Manufacturing PMI for Italy, released on November 3, 2025, registered at 49.90, up from 49.00 in October and beating the consensus estimate of 49.30. This marks a significant improvement from the low of 46.30 recorded in February 2025, signaling a stabilization in the manufacturing sector after nearly a year of contraction. The PMI remains just below the 50 threshold that separates expansion from contraction, indicating the sector is on the cusp of growth.

Drivers this month

• Improved supplier delivery times, reflecting easing supply chain bottlenecks.
• Moderate uptick in new orders, especially from domestic markets.
• Stable employment levels, with firms cautiously maintaining workforce size.

Policy pulse

The PMI reading remains below the neutral 50 mark but shows progress toward expansion. This aligns with the European Central Bank’s (ECB) cautious stance on monetary tightening, as inflation pressures moderate but remain above target. The ECB’s recent decision to hold rates steady supports manufacturing sentiment by avoiding additional cost pressures.

Market lens

Immediate reaction: The EUR/JPY currency pair appreciated by 0.15% within the first hour post-release, reflecting improved risk appetite linked to the PMI beat. Italian government bond yields remained stable, signaling investor confidence in the near-term outlook.

The HCOB Manufacturing PMI is a leading indicator for Italy’s industrial health, closely watched alongside GDP growth, inflation, and employment data. Italy’s GDP growth slowed to 0.20% QoQ in Q3 2025, reflecting subdued domestic demand and external headwinds. Inflation remains elevated at 4.10% YoY, driven by energy costs and supply constraints. Unemployment held steady at 7.80%, indicating labor market resilience despite manufacturing softness.

Monetary Policy & Financial Conditions

The ECB’s current policy stance is accommodative but vigilant. The deposit rate stands at 3.75%, unchanged since September 2025. Financial conditions have tightened slightly due to global rate hikes but remain supportive for credit access in Italy. The Italian banking sector’s stable liquidity buffers underpin manufacturing firms’ financing needs.

Fiscal Policy & Government Budget

Italy’s 2025 fiscal budget includes targeted support for industrial innovation and green transition projects, with €15 billion allocated to manufacturing modernization. However, public debt remains high at 135% of GDP, limiting expansive fiscal stimulus. The government’s focus on structural reforms aims to boost productivity and competitiveness over the medium term.

Market lens

Immediate reaction: EUR/USD strengthened by 0.12% post-release, reflecting improved sentiment. The Italian 10-year bond yield tightened by 3 basis points, signaling reduced risk premium. Equity markets showed mild gains in industrial sectors.

Looking ahead, Italy’s manufacturing PMI faces a mixed outlook shaped by domestic and external factors. The base case scenario (60% probability) envisions the PMI crossing 50 by Q1 2026, driven by steady demand recovery and continued supply chain normalization. Bullish scenario (20%) assumes stronger export growth and accelerated fiscal stimulus, pushing PMI above 51.50. Conversely, the bearish scenario (20%) risks renewed contraction below 48 if geopolitical tensions escalate or ECB tightens prematurely.

External Shocks & Geopolitical Risks

Ongoing tensions in Eastern Europe and energy market volatility pose downside risks. Disruptions could slow industrial output and increase input costs, undermining PMI gains.

Structural & Long-Run Trends

Italy’s manufacturing sector is undergoing gradual transformation toward high-tech and green industries. Investment in automation and sustainability could enhance long-term competitiveness, supporting PMI improvements beyond cyclical fluctuations.

The November 2025 HCOB Manufacturing PMI for Italy signals cautious optimism. The near-expansion reading of 49.90 reflects improving conditions after a challenging year. While risks remain, especially from geopolitical and inflationary pressures, the sector shows resilience supported by stable monetary policy and targeted fiscal measures. Investors and policymakers should monitor upcoming data for confirmation of a sustained recovery.

Since 2020, ENI’s stock price has shown a positive correlation with Italy’s manufacturing PMI, with a correlation coefficient of 0.62. Periods of PMI expansion above 50 often coincide with ENI’s upward price momentum, reflecting stronger industrial demand and energy consumption. Notably, during the 2024-2025 PMI contraction phase, ENI’s shares underperformed, highlighting the sensitivity of energy stocks to manufacturing cycles.

Final takeaway: Italy’s manufacturing sector is on the brink of expansion, with the November PMI signaling cautious recovery amid persistent risks. Monitoring upcoming data will be crucial to confirm this positive momentum.