Amid the cost of living crisis, ongoing since last autumn, Italy saw unexpected resilience in Q1 as the initial GDP growth estimate of -0.2% was revised up to 0.1% QoQ. However, there was no good news on domestic demand: a 0.8% QoQ contraction in household consumption does not bode well for the future, as consumer confidence declined further during Q2.
The rising risk of stagflation is resulting in a slashing of growth estimates and an increase in revisions to inflation simultaneously. The growth outlook for Italy has been revised down on tighter financing conditions and monetary policy normalization, coupled with the energy crisis in Europe and global value chain bottlenecks. Thus, GDP growth in Italy has been revised downwards to 2.6% for 2022, slowing to 1% for 2023, while the Eurozone is expected to grow by 2.4% in 2022 but slow to 1.3% in 2023.
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