Italian economic growth seems to have rebounded mildly in Q3

The Italian economic growth is expected to have recovered slightly in the third quarter after stalling in the previous quarter. According to a Societe Generale report, the GDP of Italy is likely to have grown 0.2 percent in sequential terms, as compared with 0 percent in the second quarter. The likely mild rebound is underlined by the robust recovery in industrial production in the third quarter, which rose 1.1 percent in sequential terms.

Consumption is expected to have mainly driven the economic growth as easing of the fiscal policy and additional improvement in the labor market continues to underpin disposable income. Meanwhile, inventories and government spending are expected to have recovered in the September quarter, after being a drag in the second quarter.

However, business investment is expected to have weakened further, which would be the second straight quarter of decline, as the woes of banking sector and political uncertainties continue to negatively impact the investment decisions of the companies.

The business sentiment indicators, such as PMIs, have continued to stay weak, and the bank lending survey has indicated to a sharp decline in credit demand. Moreover, net exports are likely to be a small drag on growth in the third quarter after contributing positively to the second quarter growth. This is because the exports decelerated in the quarter.

“Looking ahead, the 2017 outlook is not much brighter: banking woes, political uncertainty and fiscal policy are all likely to weigh on growth, while tightening real disposable income should suffer from the increase in inflation”, added Societe Generale.