In March 2025, morale among Italian businesses and consumers significantly declined, raising concerns about the economic growth prospects for Italy, the euro zone's third largest economy.

This downturn in sentiment is attributed to weak economic data, geopolitical tensions, potential U.S. trade tariffs, and challenges in accessing EU pandemic recovery funds.

The decline in business confidence was primarily driven by a sharp decrease in morale within the service sector, although the construction sector showed slight improvement and retail sentiment remained stable.

The ISTAT composite business confidence index fell to 93.3 from 94.7 in February, marking the lowest level since November 2024.

Consumer confidence also saw a dramatic drop, decreasing from 98.8 in February to 95.0 in March, significantly lower than analysts' expectations.

Looking ahead, analysts anticipate continued modest economic growth for Italy in 2025, projecting a growth rate of 1.2%, which remains below the government's target.