By Luca Mezzomo – Macroeconomic & Fixed Income Research, Research Department, Intesa Sanpaolo
According to the preliminary estimate released by Istat, Italian GDP increased by 0.2% q/q and 0.5% y/y in 2015Q2. The quarterly change, therefore, slows down marginally from the first quarter (0.3%) and is in line with our estimate (retouched downward from the earlier 0.3% after the release of June industrial output data).
Istat reported that growth came from services, in the face of stagnation in industry (including construction, which remains a weak spot in the Italian economy) and a contraction in agriculture: this means that growth comes less than before from the external sector, due to stronger imports, and that is slightly more reliant than before on domestic demand.
The ‘acquired’ change (that is, the average annual increase assuming zero growth in the second half) is 0.4%. Assuming a growth of 0.3% q/q in both the third and in the fourth quarter, which is our baseline scenario, in 2015 average annual growth would stand at 0.6% y/y.
Therefore, the data are not inconsistent with a GDP increase of 0.7% in 2015, as assumed by the government in its fiscal plan. Besides, we expect industrial production to have rebounded in July and we are positive about Q3 despite the slowdown in China. Last but not least, the recent drop in oil prices will provide a further unexpected boost to real disposable income in the final months of 2015.
Previously, France had announced a zero quarterly change after +0.7% q/q in 2015.T1, while GDP rose in Germany by 0.4% q/q and 1.6% y/y – slightly better than that could be expected in light of the poor performance of industrial production in June.
The picture is completed by robust data in Spain (+ 1.0% q/q), but weak and below forecasts in the Netherlands (+ 0.1% q/q and 1.6% y/y, a sharp slowdown from 2.5% first quarter). Among the smaller Eurozone economies, Slovakia has done better than expected (3.2% y/y, accelerating from 3.1%), as well as Greece (0.8% q/q). Finland contracted more sharply (-0.9% y/y from -0.7%, the latter figure revised up from -1.2%). Overall, Eurozone growth continues at a moderate pace, with no signs of acceleration but with a significant reduction in the gap between center and periphery which opened during the debt crisis.