Italy: GDP growth stalls in Q2
September 2, 2016
In Q2 2016, GDP recorded flat growth over the previous quarter in seasonally- and working-day adjusted terms, according to detailed data released by the National Statistics Office (ISTAT) on 2 September. The reading matched the preliminary estimate and came in below the 0.3% rise in Q1. In addition, the figure marked the lowest reading since Q4 2014. Italy’s deterioration was broad-based with all components of domestic demand weakening in the second quarter. The only good news was the positive contribution of the external sector.
Private consumption growth decelerated to 0.1% from the 0.4% recorded in Q1, the worst result since Q1 2015. Government consumption swung from a 0.2% increase in Q1 to a 0.3% fall. Fixed investment also turned around from Q1’s 0.9% expansion to a 0.3% drop in Q2, marking the worst result in almost two years. In addition, GDP growth received a further negative contribution from lower inventories.
The external side of the economy was the only bright spot, as exports swung from a 1.2% contraction in Q1 to a 1.9% expansion in Q2, the best result in almost six years. Imports also rebounded from a 0.3% drop in Q1 to 1.5% growth. As exports increased more than imports, the external sector’s net contribution to overall growth bounced back from minus 0.3 percentage points in Q1 to plus 0.2 percentage points in Q2.
In annual terms, the economy grew 0.8% in Q2, which was slightly below Q1’s 1.0% rise and marginally higher than the 0.7% increase reported in the preliminary estimate. The lack of incisive market-liberalizing reforms, the continual postponement of a reduction in public spending and the ongoing banking sector instability paint a bleak picture for the Italian economy.