Italian Economy to Slow in Coming Months

In its monthly economic bulletin, ISTAT said its latest composite leading indicator “continues to decline”, as it has throughout this year, “signaling a continuation of the current phase of slowing economic growth”.

Gross domestic product rose a quarterly 0.2% in the second quarter, data showed earlier this week, following a 0.3% rise in the first three months, and was up just 1.1% on an annual basis, Reuters reported.

The 0.2% quarterly rate was the slowest since the third quarter of 2016, while the 1.1% annual rate was the slowest since the fourth quarter of the same year.

Economy Minister Giovanni Tria said last month the 1.5% full-year 2018 growth forecast inherited from the previous center-left administration will probably have to be revised down due to slowing exports and industrial output.

Confidence in Italy’s services sector edged down in July and economists suggested underlying risks could put pressure on the economy in the coming months.

Italy’s services purchasing managers’ index reading for July came in at 54 according to IHS Markit, above the 53.6% by a Reuters poll but below June’s reading of 54.3. The surveys measure sentiment among executives, with a reading above 50 indicating growth.

Friday’s report found new orders rising at their slowest rate since October 2016. Meanwhile, input costs continued to rise, while output prices charges by services companies fell for the sixth consecutive month amid a competitive environment, and business confidence fell to its lowest level since July 2016.

“Although there were reports of increased demand, market activity was generally reported to be weaker than earlier than in the year. Panelists commented that growth had softened in spite of promotional activities and discounts being offered to clients,” said the report.

Inflation, driven by higher fuel prices, continued to bite, and “general economic uncertainty and worries over credit access were reported.”

“Delving deeper into the details revealed some worrying trends and increasing downside risks to short-term growth,” said Paul Smith, economics director at IHS Markit.

Friday’s figures come as a sharp selloff of Italian government debt continues into its second day, reaching lows not seen since June when the election crisis prompted concerns that a new populist coalition was considering taking Italy out of the eurozone.