Italy GDP Q2 2017


Italy: Economy keeps pace in Q2

August 16, 2017

GDP grew 0.4% over the previous quarter in Q2 in seasonally and working-day adjusted terms, according to an advance estimate released by the National Statistics Office (ISTAT) on 16 August. The result was in line with the 0.4% growth recorded in both the first quarter of this year and the last quarter of 2016. According to the press release, the expansion in Q2 was the result of growth in both the industrial and service sectors, while the agricultural sector contracted. In annual terms, GDP grew a multi-year high of 1.5% in Q2, up from Q1’s 1.2% expansion.

Industrial production grew robustly in the second quarter of this year, mainly on the back of expansions in the production of pharmaceutical products and means of transport. On the demand side, preliminary data indicated that domestic demand contributed positively to growth, more than offsetting a slightly negative contribution from the external sector. More detailed national accounts will be released on 1 September.

The Italian economy continues to be burdened by numerous and long-standing structural weaknesses, political fragmentation, weak productivity growth, a still-fragile banking sector and troubled public finances. These weaknesses weigh on the outlook, keeping growth prospects for the Mediterranean country below those of its European peers. Nevertheless, the recovery should firm up this year and the economy is expected to continue gaining steam. The external sector should offer some additional support to growth thanks to strengthening global trade, compounded by steady household spending and rising business investment, which will benefit from loose financing conditions, better demand prospects and tax incentives.

Against this backdrop, FocusEconomics Consensus Forecast panelists see the economy increasing 1.2% in 2017, which is unchanged from last month’s forecast. For 2018, panelists expect the economy to decelerate modestly and expand 1.0%.

Author: Massimo Bassetti, Economist

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