Inflation and Construction Output - Consumer price inflation in Italy rose to 1.6% in February 2026, up from 1% in January 2026, marking the highest level in five months [1] - The construction production index showed a year-on-year increase of 5.3% in December 2025, following growth rates of 2.5% in November and 7.3% in October 2025 [1] Residential Construction Sector Challenges - The residential construction sector is expected to weaken significantly in 2026 due to the cessation of the "Superbonus" tax incentive, which ended on January 1, 2026, after being reduced from 110% to 70% in 2024 and 65% in 2025 [3] - High interest rates, declining building permits, and rising construction costs are anticipated to further impact the output of the Italian construction industry in 2026 [3] Construction Cost Trends - The construction cost index for residential buildings increased by 2.3% year-on-year in December 2025, with an annual average increase of 1.8% in 2025, following a slight decline of 0.1% in 2024 [4] - Rising construction material and energy prices are driving up costs, particularly affecting new homes, with the ongoing conflict in the Middle East expected to exacerbate energy price increases [4] Civil Engineering Investments - Despite challenges in the residential sector, investments in civil engineering works are projected to provide some support to the Italian construction industry in 2026 [5] - The construction confidence index improved by 3.3% month-on-month in February 2026, following declines in the previous months, indicating a rise in sentiment particularly in civil engineering and specialized construction activities [5]