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Paolo Pizzoli, Senior Economist at ING, notes that Italy’s seasonally adjusted 3Q18 GDP was flat quarter on quarter while expanding by 0.8% in annual terms.

Key Quotes

“Istat indicated  that domestic demand (gross of inventories) and net exports  were both growth neutral.  On the back of a deteriorating international demand backdrop, we expected net exports to subtract from quarterly growth, but softer domestic demand  kept a lid on imports as well.”

“On the domestic demand front,  we suspect soft industrial production translated into slower inventory accumulation, with private consumption and gross fixed capital formation just about able to compensate.”

“On the one hand, consumer confidence edged up to 116.6 (from 116.1 in September), confirming close to recent highs; the improvement built on the expectation component, while the current component softened.”

“More worryingly, the composite business confidence fell for the third time in a row, reaching 103.6 – the lowest level since September 2016.”

“With external headwinds likely to continue to weigh on net exports, the onus of growth looks set to remain on domestic demand.”

“Tentatively anticipating a 0.1% QoQ GDP expansion for 4Q18, we revise our forecast for average 2018 GDP growth downwards to 1% (from 1.1% previously).”