The gradual improvement in assessments of Italy’s overall economic conditions, underway since the second quarter of 2025, continued in the final months of the year. This is according to the Bank of Italy’s survey on inflation and growth expectations, conducted between 20 November and 16 December 2025 among Italian industrial and services firms with at least 50 employees.

Assessments and expectations regarding demand - both domestic and foreign - were more favorable than in the previous survey, with the exception of the construction sector. Wage growth expectations over the next 12 months stand on average at around 2 percent, the central bank said.

Short-term expectations for the economic conditions in which firms operate have edged up slightly, reflecting a reduced negative impact from economic and political uncertainty, as well as from trade policies. Employment is expected to continue expanding over the next three months.

Compared with the previous quarter, assessments of investment conditions are less negative overall. While they have improved slightly in manufacturing and services, they have deteriorated in construction. Nevertheless, nominal investment spending in 2026 is expected to increase overall compared with the previous year. A significant share of manufacturing firms reported having made use of the “Transition 4.0” and “Transition 5.0” incentives.

Price growth for firms’ own selling prices eased slightly across the economy, and expected price dynamics over the next 12 months remain moderate. Consumer inflation expectations declined across all time horizons, settling between 1.6 and 1.8 percent.

More specifically, in the fourth quarter of 2025 the balance between positive and negative assessments of the general economic situation showed further improvement, although it remains in negative territory. The share of firms reporting stable conditions continues to be predominant, with no significant differences across sectors. Compared with the September survey, assessments by larger firms have become less unfavorable.

Finally, judgments on total demand and foreign demand improved both compared with the previous survey and with the same period in 2024, which had been marked by heightened uncertainty surrounding the potential effects of U.S. trade policies.