Italy: Economy grows at fastest pace on record in Q2 on favorable base effect
A second release confirmed that economic activity bounced back, growing 17.3% year-on-year in the second quarter, contrasting the 0.7% contraction logged in the first quarter and largely flattered by a low base effect.
The upturn reflected improvements in private consumption, public spending, fixed investment and exports. Household spending increased 14.2% in the second quarter, which contrasted the first quarter’s 1.1% contraction, following the gradual lifting of Covid-19 restrictions in the period and boosted by accumulated savings. Government spending accelerated to a 1.6% expansion in Q2 (Q1: +1.4% yoy), while fixed investment growth improved to 38.2% in Q2, from the 11.7% expansion recorded in the prior quarter.
Exports of goods and services increased 38.4% on an annual basis in the second quarter, which was above the first quarter’s 1.2% expansion. In addition, imports of goods and services growth picked up, expanding 27.2% in Q2 (Q1: +2.5% yoy).
On a working-day and seasonally-adjusted quarter-on-quarter basis, economic growth accelerated to 2.7% in Q2, following the previous quarter’s 0.2% expansion.
On the outlook for the remainder of the year, Paolo Pizzoli, senior economist at ING, said:
“Recent developments in business confidence indicators have sent some warning signals, though, mainly related to possible supply-side constraints. These should not be underestimated, in particular for those manufacturing sectors making deep use of semiconductors as an input. However, the same confidence reports suggest that producers had in many cases accumulated some stocks to address the issue, and that order books had been filling healthily until the end of August. We thus believe that the existing supply constraints will have a limited impact on Q3 2021 GDP growth, but could be felt more from Q4 2021.”