Confidence among Italian manufacturing firms was slightly stronger than expected in October, edging up on lower inventories and better output prospects, research group ISAE said on Wednesday.
The government-funded think tank said its seasonally adjusted business confidence index rose to 91.0 this month compared with 90.7 in September and 91.1 in August.
"We can see a clear trend of a gradual improvement in the index since the start of the year, consistent with a moderate manufacturing recovery," ISAE statistician Marco Malgarini told reporters at a briefing.
The report follows a marginal rise in October in Germany's closely watched Ifo business confidence index and a stable reading in the Belgian central bank's manufacturing sentiment survey, seen as a bellwether for eurozone economic sentiment.
The picture emerging suggests eurozone manufacturing sentiment in October showed surprising resilience to soaring international oil prices.
In Italy, the improvement in near-term production prospects and the fall in inventories were partly offset by a decline in current orders.
Falling inventories are seen as a positive sign for output prospects, suggesting firms will have to raise production to meet demand rather than rely on existing stocks.
ISAE said it had overhauled its business confidence survey in October, changing the base year for the index to 2000 from 1995, updating the industrial sectors and weightings used, and amending its methodology.
The result is more in line with the surveys conducted in Germany by the Ifo institute and in France by INSEE and creates a less erratic, smoother trend, ISAE said.
Most analysts surveyed by Reuters had expected business confidence to fall slightly in October, though the survey of nine analysts was carried out using ISAE's previous base year under which the index levels were around five points higher.
Analysts welcomed the slight rise in October sentiment, but said the picture of a struggling Italian manufacturing sector remained little changed.
"We expect the manufacturing sector to expand by about 0.3 or 0.4 percentage points in the fourth quarter from the third and this data from ISAE allows us to confirm that forecast," said UBM economist Marco Valli.
Italian consumer confidence as measured by ISAE has shown a more pronounced upward trend in recent months. The October survey rose for the fifth month running to post its highest reading for a year.
ISAE's business confidence index is a composite of the survey's seasonally adjusted indicators for current inventory levels, current orders and the outlook for production over the next three to four months.
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