Italy: GDP growth steadies in Q2
September 1, 2017
Economic growth was steady in Q2 2017 on the back of healthy investments and robust household spending. This was on par with the quarter-on-quarter 0.4% growth rate recorded in the previous two quarters, matching preliminary estimates. In Q2 2017, GDP grew a seasonally- and working-day adjusted 1.5% compared to the same quarter of the previous year. This was both an acceleration compared to Q1’s 1.2% growth rate and the fastest annual expansion since Q1 2011.
Quarter-on-quarter economic growth in the second quarter continued to be underpinned by a recovery in domestic demand. Gross fixed investment performed particularly well in Q2, growing a solid 0.7% to contrast with Q1’s 1.6% decrease. This performance was supported by higher investment in equipment and other products, and transport equipment. However, lower investment in construction—the largest component of Italian gross fixed investment—detracted from the overall performance. Private consumption moderated somewhat in Q2, rising 0.3% compared to 0.5% in Q1. Contributing to this moderation was a contraction of 0.6% in the consumption of durable goods. Government consumption, meanwhile, swung to a 0.1% contraction in Q2, a deterioration from the 0.5% expansion it recorded in Q1.
The external sector did not materially contribute to the overall quarter-on-quarter growth figure in Q2, marginally down from the 0.1 percentage-point contribution it made in Q1. Growth in exports of goods and services came in at 0.6% (Q1: +1.6% qoq), while growth in imports of goods and services came in at 0.7% (Q1: +1.6% qoq). The two respective changes essentially cancelled each other out in Q2.
The Italian economy continues to be burdened by numerous long-standing structural issues, namely its rigid labor market, stagnant productivity, high volume of non-performing loans in the banking sector and high public debt. These weaknesses weigh down on its outlook, despite Q2’s encouraging growth performance.
Author: Edward Gardner, Economist