Based in Paris, BNP Paribas' Economic Research Department is composed of economists and statisticians:
The Economic Research department’s mission is to cater to the economic research needs of the clients, business lines and functions of BNP Paribas. Our team of economists and statisticians covers a large number of advanced, developing and emerging countries, the real economy, financial markets and banking. As we foster the sharing of our research output with anyone who is interested in the economic situation or who needs insight into specific economic issues, this website presents our analysis, videos and podcasts.
+39 335 5934620 paolo.ciocca@bnpparibas.com
In Q3 24, real GDP remained unchanged. Domestic demand added 0.5 percentage points to the overall growth, while the net exports contribution was negative. The economic slowdown reflects the disappointing performance of manufacturing (-1.3%), while the services value added rose 6.5% above pre-crisis level. Italian exports have been declining in the last year and a half. The potential implementation of new measures to protect US production by the new US administration might have a significant impact on the Italian production system. The Italian trade surplus with the US in the first eight months of 2024 stood at EUR 26.5 bn, about 70% of the overall trade surplus.
The recovery of the Italian economy continues, although at a moderate pace. In Q2 2024, real GDP rose by 0.2% q/q, supported by domestic demand, while net exports’ contribution was negative. The slowdown of investment reflected the decline of expenditure on dwellings, while machinery investment increased. Consumption moderately increased. Value added slightly accelerated in the services sector while continuing to contract in the manufacturing sector. The labour market has shown significant improvement since Q2 2021. In Q2 2024, the employment rate rose to 62.2%, a historical peak that, nevertheless, remains low in comparison with the main EU partners.
In Q1 2024, the Italian economy slightly accelerated. Real GDP rose by 0.3%, with a mixed evolution by sector. Valued added of construction rose, while that of manufacturing declined, suffering from the slowdown of exports. Services increased moderately, benefitting from the recovery of tourism. Domestic demand contributed positively to the overall growth and households profited from the improvement of labour market conditions. Economic and financial conditions of firms further improved. In Italy, in the first five months of 2024, on average, the consumer price index increased by less than 1% y/y per month.
In 2023, Italian real GDP rose by almost 1%. The recovery of the economy was broad-based. Private consumption rose by 1.2% in 2023, benefitting from the further improvement in labour market conditions. In 2023, investment continued to be the main driver of the Italian recovery. Expenditures on machinery and ICT equipment were 20% higher than in 2019, with some first positive effects on Italian potential growth. The growth in investment since the post-pandemic period has increased the number of firms using technologies relying more effectively on digital transformation to boost productivity.
In 2023, the recovery of the Italian economy slowed in a somewhat bumpy way. On the one hand, after supporting the first part of the recovery, fixed investment declined. But on the other hand, consumption surprised on the upside (+1.5% with respect to Q4 2022). Italian households benefited from both a significant improvement of labour market conditions and deceleration of inflation. Consumer confidence recovered, supporting private expenditures. In Q4 2023, inflation marked a decisive slowdown: the declining trend is mainly due to the deceleration of energy prices (up +1.2% on average in 2023 compared to +50.9% in 2022).
In Q2, real GDP declined by 0.4%, driven by weakening domestic demand. Investment in machinery and equipment fell, reflecting the worsening of firms’ economic and financial conditions. Consumption slightly recovered in real terms. Italian households suffer, however, from both higher consumer prices and increasing interest rates. In Q2, there was a contraction across many sectors. Services value added unexpectedly declined, reflecting the slower recovery of tourism. Inflation is slowly falling: in September it grew +5.7% y/y. Contrary to most predictions, in Q2 2023 house prices increased by 2.0% q/q.
Following a mild contraction in the last three months of 2022, Italian GDP rose by 0.6% in Q1 2023. The carry-over for 2023 is +0.9%. In Q1, domestic demand excluding inventories added 0.7 percentage points to growth, while the contribution of both net exports and inventories was negative. Investment rose by almost 1%, reflecting the improvement of economic and financial conditions for Italian firms. Italian households benefited from the strong recovery of nominal income, but still suffered from the purchasing power loss due to inflation. This latter remains among the highest in the euro zone, at 8% y/y in May (harmonised measure).
In Q4 2022, GDP slightly declined on a quarterly basis. Domestic demand and the change in inventories subtracted 0.4 p.p. and 1.1 p.p., respectively from the overall growth, while net exports added almost 1.5 p.p. The Q4 GDP contraction mainly reflected the moderate weakening of the services sectors that had experienced a strong rebound in the previous six quarters. Despite its Q4 decline, services value added is 1.7% higher than in Q4 2019, explaining about half of the total recovery of the Italian economy. Overall, the 2023 outlook remains positive, with GDP expected to grow close to 1.0%.
During the summer, the Italian economy continued to show a strong resilience against increasing uncertainty. In Q3 2022, real GDP rose by 0.5% q/q, benefiting from the recovery of services, while both manufacturing and construction suffered. Domestic demand more than offset the negative contribution of net exports. A wind of growth continues to blow on the Italian real estate market. In Q2 2022, residential sales recorded a +8.6% y/y growth, while house prices in the same quarter grew by 5.2% y/y. Although the carry-over for 2022 is 3.9%, the outlook for the Italian economy has become more uncertain. Households suffer from high inflation, with purchasing power declining, while firms have to cope with increasing costs of production.
During the first half of 2022, the Italian economy has gradually gained strength. In Q2 2022, the real GDP was 1.1% higher than in Q4 of 2019. The carry-over for 2022 is 3.5%. The recovery that resulted was widespread in a variety of sectors. Construction continued to grow, recording a robust increase in comparison with the pre-COVID level, while both manufacturing and services increased as well, benefiting from the recovery of tourism. The overall outlook for the Italian economy has become more uncertain. Households and firms are extremely cautious. In the three months ending in July, industrial production fell by more than 1.5% q/q. The value of retail trade continued to rise, while the volume of sales declined, suffering from the acceleration of inflation.
In contrast to the previous recessions, the Italian economy has already recovered what it lost in 2020. The carry over for 2022 is 2.6%. In Q1 2022, real GDP rose by 0.1%, with an annual growth rate above 6%. Value added for construction continued to increase, while manufacturing declined and services stagnated. The economic recovery mainly reflects the robust evolution of investment, while private consumption declined, as Italian households remained extremely cautious. Imports rose strongly, bringing the current account balance into negative territory. The economic recovery in 2021 was less intense in the Southern regions than in the Centre-North, thereby widening the gap between the two areas.
In Q4 2022, real GDP rose by 0.6%, after having increased by 2.7% and 2.5% in Q2 and Q3 respectively. This slowdown was widespread. Manufacturing stagnated and services suffered from the upsurge of Covid-19 cases. Uncertainty is fostered by inflation which turns out to be more persistent than expected. In March 2022, the consumer price index rose by 6.7% y/y. The deterioration of the economic environment has not affected the labour market yet. In the three months to February 2022, employment increased by 100,000 units almost completely recovering the pre-pandemic level
After a modest expansion in Q1 2021, real GDP rose by more than 2.5% q/q in both Q2 and in Q3. This recovery was widespread. In Q3, net exports added 0.5 percentage point to GDP growth thanks to a stronger rise in exports than imports. Thanks to the easing of social restrictions, consumption has further increased, while favourable financing conditions and fiscal incentives have supported investment. During the summer, the recovery expanded to the services sector, which benefitted from higher tourist receipts. Manufacturing production has recovered entirely from the 2020 decline, ending up 2% higher than in Q4 2019. Labour market conditions are not as good as the recovery would suggest.
The economic recovery has gradually gained momentum, becoming increasingly more widespread for various components and sectors. The improvement in the overall scenario has boosted optimism among companies, supporting business investment. While manufacturing activity had begun to increase in H2 2020, the services sector benefited from an upswing in consumption in Q2, despite the still disappointing international tourism trends. A wind of surprising optimism continues to blow through the Italian real-estate market, driven mainly by home purchases by many families keen to improve their housing conditions. In Q2 2021, residential sales recorded +70% growth compared to Q2 2020, and +26.1% compared to Q2 2019.
At the beginning of 2021, the economic growth surprised on the upside. In Q1, real GDP rose by 0.1%. Private consumption declined, reflecting the disappointing evolution of income and a still high propensity to save, investment rose by almost 4%. The recovery turned out to be uneven, with industry and construction seeing a quicker rebound, while services continued to suffer. The economic growth is expected to strengthen in the coming months. The acceleration of the vaccination programme and a significant improvement in the health outlook have boosted optimism among consumers and businesses. In order to make the recovery long lasting, Italy has to improve the quality of human capital to balance the decline in productivity also due to an elderly work force.
In 2020, real GDP fell by 8.9%, with almost 2.5 million of full-time equivalent jobs lost. The decline in consumption was the main driver of the recession, accounting for three fourths of the economic downturn. Stagnating incomes and the lack of confidence increased households’ propensity to save. The services sector was the most severely affected by the crisis, with value added declining by 8.1%, while manufacturing benefitted from the moderate recovery of exports. The problems raised by the pandemic combined with -and worsened- structural issues that had been slowing down the country’s economic growth up to now. In the years to come it will be hard to implement a solid growth pattern without decisive interventions that would foster innovation and productivity.
Following an impressive decline in the first half of 2020, the Italian economy rebounded over the summer. Value added rose strongly in construction and manufacturing, while the recovery in the services sector was less substantial. Favourable indications also come from house prices invalidating the darkest scenario depicted at the beginning of the pandemic. To contain the second wave of infections, the Italian Government has taken restrictive measures, with negative effects on activity. The economy is expected to decline in Q4 again. This contraction should be less significant than in the first half of the year, with only a moderate impact on 2020 growth, while the carry- over in 2021 should be more sizeable.
In Q2 2020, real GDP fell by 12.8%, dropping down to values recorded in the 1990s. A weakened domestic demand was the main driver of the recession, with households reducing their expenditure and investment falling by 15%. The contraction became widespread. The real estate sector sent mixed messages: in Q1 2020 prices went up while transactions experienced a sharp decline. Latest data have signaled a rebound of the economy, even if the scenario remains uncertain. The strength of the recovery will depend on the behaviour of businesses and households, which will in turn be affected by the evolution of the pandemic. In the real estate sector, both prices and transactions should experience a sharp decline by the end of the year. Transactions should only partially recover in 2022.
The outbreak of Covid-19 took hold in Italy earlier than in other EU countries, with strong negative effects on the economy. In Q1 2020, real GDP fell by 5.3%. The contraction affected all economic sectors: manufacturing, services and construction. Domestic demand had a negative contribution (-5.5%). Italian households become extremely cautious, reducing expenditures more than income: the propensity to save rose to 12.5%. The pandemic has dramatically hit the labor market: disadvantaged categories, such as low skills workers, those with precarious contracts and young people, are the most severely affected by the lockdown.
The outbreak of Covid-19 hit Italy while the economy was already contracting. The exceptional growth of infected people has brought the Italian Government to take harsh measures, that include stopping all economic activities, excluding those considered as necessary, and imposing a quarantine for the entire population. The combination of an induced supply and demand shocks is going to cause a recession, which is expected to be deep and to last at least until June. In 2020 as a whole, despite the strong support coming from fiscal and monetary policy, the Italian economy should decline by some percentage points.
Italy continues to record a cycle of subdued activity, with the annual growth rate of real GDP slightly above zero, as a result of the feeble growth in services, the modest recovery in construction and the persisting contraction in the industrial sector. From Q1 2018 to Q3 2019, manufacturing production has fallen by more than 3%, with the strongest declines in the sector of means of transport, in that of metal products and in that of textile, clothes and leather items. Together with the short term slow down, Italy is going to face long term challenges due to the ageing population and its impact on the labour force and the pension spending.
