Italy: Growth eludes the Italian economy in Q3
Flat reading in Q3: A second release confirmed that GDP flatlined on a seasonally adjusted quarterly basis in Q3 (Q2: +0.2% qoq s.a.), marking the worst result since Q4 2023. On an annual basis, economic growth waned to 0.4% in Q3, following the previous quarter’s 0.6% increase.
Fixed investment drags on growth: Domestically, fixed investment weighed on the result, slipping further into negative territory to minus 1.2% in Q3 (Q2: -0.4% qoq s.a.). The downturn was driven by a steeper decline in dwelling construction, as the impact of the Superbonus scheme began to fade. Moreover, government spending contracted 0.1% in the third quarter (Q2: +0.9% qoq s.a.). That said, private consumption accelerated to 1.4% in Q3 (Q2: +0.6% qoq s.a.), buoyed by a tight labor market and a low inflation rate.
On the external front, exports of goods and services contracted 0.9% in Q3 (Q2: -1.2% qoq s.a.), while imports of goods and services growth rose 1.2% in Q3 (Q2: +0.3% s.a. qoq).
Private consumption takes the lead: Our panelists expect the economy to be picking up pace in the current quarter and expect sequential growth to then stabilize through Q4 2025. As a result, our Consensus is for the economy to gain traction in 2025 as a whole relative to 2024, getting closer to its past-decade average of 1.0%. Private spending will become the main engine of growth, fueled by a tighter labor market and laxer financing conditions. Moreover, exports of goods and services will add impetus amid an expected recovery in Germany. That said, fixed investment is set to decelerate with the end of the Superbonus scheme in 2025. The strength of the German manufacturing sector and rising protectionism under President-elect Trump are key risk factors.
Panelist insight: Commenting on the future trajectory of Italy’s outlook, analysts at Goldman Sachs stated:
“In our baseline scenario of targeted US tariffs on Europe—focused on autos-related exports—we estimate a hit to the level of Euro area real GDP of 0.5%. We forecast a slightly lower impact on the Italian economy, and we expect real disposable income to experience an additional pick up next year. Given how subdued private consumption has been in Italy until now, we expect the consumption outlook to materially improve in 2025.”