Italian economic growth likely to accelerate slightly higher in 2017

Italian real GDP grew modestly in the first quarter of this year by 0.2 percent sequentially, coming in line with expectations but underperforming most of euro area member states. It was the same moderate rate as in the fourth quarter of 2016. On a year-on-year basis, the real GDP growth decelerated in the first quarter to 0.8 percent from fourth quarter of 2016’s 1 percent, which was the most robust annual pace of growth since 2011.

The economic growth was mainly driven by domestic demand, while net trade weighed on the economic activity. In the meantime, services and agriculture added to the GDP growth, whereas industrial production shrank. In all, hard economic data have not been able to mirror the same buoyant picture that leading indicators reflect. Furthermore, Markit/ADACI Business Activity Index for services surged to a ten-year high of 56.2 in April from March’s 52.9. Meanwhile, the respective index for the manufacturing sector rose sharply to a six-year high of 56.2 from March’s 55.7.

The government expects Italy’s real GDP to expand 1.1 percent this year, slightly higher than last year’s 0.9 percent growth. This would leave Italy with the most unsatisfactory performance amongst the euro area economies.