Italian economic activity is surprisingly low at the end of the year. In the third quarter, growth ground to a halt (0.0% q/q). Although early economic indicators suggest that it should be more positive in Q4 (0.4% q/q, according to our forecasts), this would ultimately not be enough for Italy to outperform the eurozone this year (with an estimated average annual growth rate of 0.5% in Italy, compared to 0.8% in the eurozone).
The industrial sector is still under pressure. In September, production declined for the twentieth consecutive month (-3.9% y/y), with this trend set to continue for the rest of the year. The results of the Manufacturing PMI survey point to a further deterioration in the situation in October (46.9; -1.4 pts), caused by a fragile international sales environment (with the new orders component down 0.6 pts, at 45.1 pts) and a weak automotive industry.
However, there is a contrasting trend on the services side. The slowdown seen over the past six months ended in October (Services PMI at 52.4; +1.9 pts), sustaining the improving overall business sentiment (Composite PMI at 51.0; +1.3 pts).
Negotiated wages are continuing to rise (3.5% y/y in Q3) faster than inflation (1.0%; +0.3 pp over one month). This ultimately boosted household confidence in October, after a year of stagnation, helping it to return to its highest level since April 2023 (-14.8). According to the results of the European Commission’s survey, the current financial situation of households has improved significantly – it has climbed back to its highest level since January 2022 (10.2; +2.3 pts) – and intentions to make major purchases over the coming year continue to rise (-24.2; +0.2 pts).
As a result, we expect household consumption to contribute slightly more positively to real GDP growth in the second half of 2024. In addition, retail sales rebounded significantly from the levels seen in previous quarters (+0.4% 3m/3m in September), but new vehicle registrations are still plummeting (-2.8% 3m/3m in October).
Article completed on 25 November 2024
