Italy: Economy stagnates in Q3
GDP reading disappoints markets: According to a preliminary reading, Italy’s GDP flatlined in calendar- and seasonally adjusted quarter-on-quarter terms in Q3, following a 0.1% contraction in the previous quarter and defying expectations of a mild rebound.
In calendar- and seasonally adjusted year-on-year terms, the economy expanded 0.4% in Q3, following 0.5% growth in the prior quarter.
Net exports improve, offsetting deteriorating domestic demand: A full breakdown of GDP by expenditure is not yet available, but the statistical office cited domestic demand as the main drag on growth; softer wage growth and a still-high saving rate likely weighed on private spending. That said, the statistical office noted that net exports contributed positively to headline GDP.
On the production side, the agricultural sector strengthened, offsetting a shrinkage in the industrial sector and a stagnation in the services sector.
A complete breakdown will be released on 28 November.
GDP to mildly grow in Q4: Our Consensus is for GDP to rise mildly in sequential terms in Q4, as past interest rate cuts should support fixed investment and private spending; the latter will also be boosted by lower inflation. That said, GDP growth will likely be subdued as the 15% U.S. tariffs on EU products weigh on the external sector.
Looking further ahead, in 2026, GDP growth is expected to edge above 2025 projected levels, supported by accelerating public spending and private consumption, the latter driven by below-target inflation and a historically low unemployment rate. That said, the economy should expand at a rate below the euro area average due to softer fixed investment growth.
Panelist insight: Commenting on the outlook, ING’s Paolo Pizzoli stated:
“Fundamentals remain consistent with some improvement on the consumption front in a low-inflation environment. We thus stick to our forecast of a small positive GDP growth in the fourth quarter.”
Commenting on the external sector, analysts at the EIU said:
“We assume that the EU-US tariff agreement reached in late July will reduce uncertainty, helping to return the Italian economy to marginally positive quarter-on-quarter growth in the coming quarters. On the downside, we expect that conditions will still be difficult for Italian exporters owing to higher US tariffs and a marked appreciation of the euro against the US dollar.”