Italy: GDP growth loses momentum in the second quarter
According to a flash release, GDP growth slowed to 0.2% on a seasonally adjusted quarter-on-quarter basis in Q2, from 0.3% in Q1. The reading was in line with market expectations. On an annual basis, economic growth accelerated to 0.9% in Q2, up from the previous quarter’s 0.6% and marking the strongest result since Q1 2023.
According to preliminary production data, Q2’s weaker momentum was primarily driven by a decline in the agriculture, forestry and fishing sector, coupled with weaker industrial activity. Conversely, the services sector supported the economy’s positive performance. From the expenditure side, net exports detracted from the overall reading, while the gross change in inventories contributed positively.
For the rest of the year, GDP growth is expected to hover near Q2’s relatively weak levels as both public and private spending growth remain steady. An increasing unemployment rate, a persistent decline in industrial output and sluggish activity in the Euro area will pose headwinds. Over 2024 as a whole, the economy is projected to expand at a slower pace than last year, primarily due to declining growth in fixed investment plus public and private spending. However, surging exports growth should offer some support. An unexpectedly swift recovery in the EU presents an upside risk.
ING analysts are optimistic on the outlook for the rest of 2024:
“The second half of the year will likely benefit from a combination of temporarily low inflation, labour market resilience, decent wage growth, and, consequently, a further recovery in household purchasing power. When matched with a decent savings ratio, now at 9.5% and above pre-Covid levels, this should create room for a gradual recovery in private consumption, with a temporary twist towards durables spurred on by the introduction of generous incentives for replacement cars early in June.”