Italy flirting with recession



GDP, flash estimate ?(Q3)
Actual: +0.2%qoq, +1.9%yoy
UBS Warburg: +0.1%qoq, +1.8%yoy
Consensus: +0.1%qoq, +1.8%yoy
Previous: Flat qoq, +2.1%yoy



Despite a positive help from calendar effects, Italian GDP growth remained 
at a low 0.1% qoq in Q3. This suggests that, without calendar effects GDP 
would have contracted slightly. This follows a flat quarter in Q2: Italian 
economy was thus very close to recession. Although details are not 
available we believe the weakness of domestic demand and a drag from net 
trade are the reasons for this weak outcome. We expect similar low numbers 
in the coming quarters.



* The Italian flash estimate showed a slightly higher than expect growth at 
0.2%. It does not provide however a breakdown, details will be available 
with the publication of the final numbers on Dec-20. At this stage, it is 
thus impossible to assess the drivers of Italian growth.


* It is important to remember that, unlike in the other countries, Italian 
GDP is not adjusted for calendar effects. In Q3 there was two working days 
more than in Q2 (64 working days against 62). This probably helped to lift 
slightly the GDP estimate.


* Italian GDP gained 0.8% for two quarters in a row in 00Q4 and 01Q1. 
Details however showed that this was due exclusively to net trade and 
stocks. Final domestic demand which includes private consumption, 
investment and public consumption gained only 0.3%qoq on average over these 
two quarters. This weak pattern was confirmed in Q2 with GDP flat qoq and 
final domestic demand up only 0.3%.


* This pattern is quite worrying as we expect net trade to contribute 
negatively to growth in the future. Italy will have to rely exclusively on 
domestic demand. ISTAT said that it expected Q4 growth to be 0.1-0.2% in 
Q4. We are more pessimistic as we expect a contraction of 0.1%.




St?phane D?o
Economic Research
UBS Warburg
Tel : +33 1 48 88 30 36
Fax : +33 1 47 63 48 08
Mob : +33 6 76 85 33 18
Stephane.deo@ubsw.com