Domestic Demand in Italy

Italy Domestic Demand | Economic News & Forecasts

Italy - Domestic Demand

The economy stagnates in Q2

In the second quarter of the year, Italy’s GDP recorded zero growth over the previous period in seasonally- and working-day adjusted terms, according to an advance estimate released by Italy’s Statistics Institute (ISTAT) on 31 July. The result was down from the first quarter’s 0.1% expansion, although it beat analysts’ expectations of a 0.1% quarter-on-quarter contraction. According to the accompanying press release, the flat reading reflected growing production in the services sector offsetting lower output in the industrial and agricultural sectors. In annual terms, growth was also flat in Q2, although this was still up from the first quarter’s 0.1% decline.

Q2’s result reflected a sizable contraction in industrial production in April-May. Furthermore, business confidence remained weak in the second quarter, and credit barely grew, pointing to sluggish private sector activity. Nevertheless, a fall in the unemployment rate recorded in May and June likely gave consumer spending some breathing room, despite downbeat consumer confidence. On the demand side, preliminary data indicated that both domestic and external demand made no contribution to growth, giving a clear image of an ailing economy. More detailed national accounts data will be released on 30 August.

Commenting on the release, Loredana Maria Federico, Chief Italian Economist at Unicredit, remarked:

“Foreign trade data available so far for 2Q19 suggest an acceleration in export quarterly growth, which was probably offset by a recovery in imports. Our expectation is that the latter was accompanied by a re-accumulation of inventories in 2Q19, which supported domestic expenditure (after a 0.7pp inventory depletion was recorded in 1Q19). Despite exports data having shown some resilience so far, sluggish growth in world trade and persistent global uncertainty are likely to take their toll on Italian exports going forward and to limit the scope for a material impulse to economic activity in the second half of the year. Italy’s manufacturing survey indicators currently do not appear to be in free fall, but they will be closely scrutinized in the coming months”.

The economy is seen remaining weak this year, chiefly due to anemic domestic demand. Consumer spending is expected to cool amid muted wage and productivity growth and deteriorating consumer confidence. Moreover, continued political and policy unpredictability, a less favorable tax regime, high interest rates and muted credit growth will continue to hit investment. On top of that, long-standing problems weigh on Italy’s outlook, including the second highest public-debt-to-GDP ratio in the European Union, a slow judicial system, high taxes and cumbersome bureaucracy. Of particular concern, the country’s huge public debt load, coupled with undisciplined government spending, could trigger renewed financial turbulence. FocusEconomics panelists project growth of 0.1% in 2019, which is unchanged from last month’s projection, and 0.5% in 2020.

Italy - Domestic Demand Data

2013  2014  2015  2016  2017  
Domestic Demand (annual variation in %)-2.8  -0.4  1.4  1.5  1.8  

Sample Report

5 years of economic forecasts for more than 30 economic indicators.


Italy Facts

Bond Yield1.54-0.40 %Jul 31
Exchange Rate1.110.65 %Jul 31
Stock Market21,398-0.99 %Jul 31

Sample Report

Get a sample report showing our regional, country and commodities data and analysis.


Request a Trial

Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.

Sign Up

Economic News

Search form