Italy: domestic demand confirmed as the main growth driver

The new data, released today by Istat, confirms that Italian GDP expanded by 0.1% in fourth quarter 2015 as indicated by the preliminary estimate. As expected, domestic demand turned out to be the main driver of growth, with private consumption leading the pack with a 0.2% contribution, with gross fixed capital formation and public consumption adding 0.1% each to quarterly growth. More surprisingly, net exports also added 0.1% to growth, showing that in the quarter the external channel was still resilient to international headwinds. No big surprises from inventories, whose negative 0.4% had been at least partially anticipated given poor industrial production data. 

"Today’s release confirms that the Italian economy ended the year on a soft note – analyst team ING comments – Data released since the start of the year indicates that a partially similar pattern might be holding for first quarter 2016". In its opinion, resilient consumer confidence and declining inflation are maintaining a favourable environment for private consumption as is the first batch of employment data, which has improved further, irrespective of the sharp reduction in the tax incentives to open-ended new hirings. In January and February PMIs stayed safely in expansion territory, both in services and manufacturing. Less positively, the extremely volatile start of the year in the stock market, and in particular in banking stocks, might have a temporary negative bearing on private investments. "All in all, at a time when most hard data for this quarter is yet to be released, we tentatively pencil in a 0.2% quarterly expansion of the Italian GDP in first quarter 2016 and 0.9% average GDP growth for the whole year".