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Italy GDP Q1 2023

Italy: GDP expands faster than previously reported in Q1

The economy rebounded in the first quarter, with GDP increasing 0.6% quarter on quarter, coming in above a preliminary estimate of a 0.5% expansion and swinging from the 0.1% contraction recorded in Q4. A positive contribution from domestic demand was behind the turnaround.

On the domestic front, hosusehold spending expanded 0.5% in Q1, contrasting the 1.7% contraction recorded in Q4, supported by a tight labor market and rising consumer sentiment. Meanwhile, fixed investment rose 0.8% in Q1, down from Q4’s 1.5% increase, likely sustained by tax incentives in the construction sector and inflows of EU recovery funds. Lastly, public spending grew 1.2% (Q4: +0.5%). Meanwhile, destocking detracted 0.1 percentage points from growth, compared to the 1.0 percentage points detracted in Q4.

On the external front, exports of goods and services decreased 1.4% in the first quarter, which contrasted the fourth quarter’s 2.1% increase, hit by global headwinds. Meanwhile, imports of goods and services fell 1.0% in Q1 (Q4: +2.4%). Overall, the external sector subtracted 0.1 percentage points from growth, swinging from the 1.5 percentage point contribution in Q4.

On an annual basis, economic growth accelerated to 1.9% in Q1, compared to the previous period’s 1.5% growth.

Commenting on the economic outlook, Paolo Pizzoli, senior economist at ING, stated:

“We do not believe that the results of the first quarter will be repeated in the second. Confidence indicators have continued to send mixed signals in April and May, with a deterioration in manufacturing and resilience in services. On the demand front, consumption might suffer from still-elevated inflation, while the de-stocking adjustment effect might partially unfold. We are currently penciling in a 0.1% quarter-on-quarter gain in Italian GDP in the second quarter.”

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