Italy’s GDP recovery has now extended for 15 quarters, although, according to the Italian bureau of statistics (ISTAT), GDP is still 0.9% below the peak that occurred in Q2 2011, yet 4.4% above the trough.
The preliminary GDP estimate for Italy stands at 0.3% QoQ/ 1.4% YoY, in line with the consensus but below our projections (0.5% QoQ, 1.6% YoY).
Although underlying details on demand are not available (they will be released on 1 June), ISTAT reports that on a quarterly basis industrial value added contribution and growth were flat while a positive contribution came from services (approx. 75% of value added) and agriculture. There was a positive contribution from domestic demand (with a positive contribution from inventories) and a negative contribution from net exports (with a possible contraction of exports).
Going forward,we expect a modest rebound in activity and growth in Q2, but the trend will be for a stabilisation/moderation.
Two major risks: domestic uncertainty, linked to the possibility of new elections and external uncertainty, linked to noise created by fears of increased protectionism from the US and related spill-overs to Italy’s exports. Business sentiment indicators and political/world trade developments to be monitored closely.
