New survey data released on Wednesday indicates that operating costs in Italy's services sector hit a 40-month high in May, as the ongoing impact of the Middle East conflict intensified.

The S&P Global Italy Services PMI Input Costs Inflation sub-index rose to 66.7 in May from 65.4 in April, reaching its highest level since January 2023.

The final reading for the headline Services PMI, which reflects the overall health of the sector, fell to 49.4, remaining below the 50-point threshold that separates expansion from contraction for a third consecutive month. This compares to a reading of 49.8 in April. A Reuters poll of 11 analysts had forecast a figure of 49.1.

Eleanor Dennison, an economist at S&P Global, noted that if the conflict in the Middle East persists, cost pressures in the services sector could rise further. However, she pointed out that sub-indices for employment and future business expectations offered some positive signals.

The employment sub-index increased to 50.6 in May from 50.3 in April, while the future business expectations index rose to 59.5 from 59.1.

Separate S&P Global data on Italy's manufacturing PMI, released earlier this week, showed input cost inflation in the manufacturing sector climbed for a fifth consecutive month, reaching a four-year high in May.

The Composite PMI, which combines manufacturing and services, was broadly stable at 50.4 in May, compared to 50.5 in April.

The government of Italian Prime Minister Giorgia Meloni revised down its economic growth forecasts in April. It now expects GDP growth of 0.6% for both this year and next, down from previous forecasts of 0.7% and 0.8%, respectively. The government projects economic growth of 0.8% in 2028, which would mark six consecutive years of sub-1% growth for Italy.