Istat: widespread reduction in corporate profit margins at the start of 2026. Rising variable costs are a major factor

Between 2019 and the first quarter of 2026, the Italian manufacturing sector, faced with numerous international shocks, recorded sharp increases in both selling prices (+18.4 per cent) and production input prices (+17.7 per cent), as well as showing, from mid-2022, a significant rise in labour costs (+12.9 per cent). Corporate profit margins, after rising in 2023, began to fall. At the start of 2026, a reduction in margins was observed across all sectors (particularly agriculture and manufacturing), caused by an increase in variable costs that outpaced the rise in selling prices. This is highlighted in the Focus accompanying the report on the performance of the Italian economy published today by Istat.

In the United States – as the note points out – the economy is still growing at robust rates, whilst the more modest expansion in the eurozone is due to the greater impact of energy shocks linked to tensions in the Middle East. Manufacturing in China continues to be driven by exports in high-tech sectors, against a backdrop of weak private consumption. The outlook for the global economy remains uncertain, although the geopolitical situation has shown a slight improvement compared with the severe tensions at the start of the year. Despite the recent fall in energy costs, the systemic effects of the conflict between the US and Iran are still weighing on global inflation.

In the first three months of 2026, Italian GDP grew by 0.3 per cent quarter-on-quarter, compared with a decline of 0.2 per cent in the eurozone. The cumulative growth rate for 2026 stands at 0.6 per cent. In May, the seasonally adjusted index of industrial production fell by 0.3% compared with April, bringing to an end three consecutive months of increases. On average for the March–May quarter, however, the index rose by 0.9% quarter-on-quarter.

The number of people in employment fell in May, standing at 24 million 336 thousand. The decline affected men, women and all age groups, with the exception of those aged 50 and over. By employment status, employment fell only amongst fixed-term employees. The unemployment rate, which remained stable at 6.2% in the euro area, fell to 5.0% (-0.1 percentage points compared with April). In June, according to preliminary estimates, the Harmonised Index of Consumer Prices (HICP) rose by 3.1 per cent year-on-year, exceeding the euro area average inflation rate for the first time since October 2023 (+2.8 per cent in June; +3.2% in May).