The Report on recent economic developments for July examines the domestic and international economic situation:
- The Italian economy slows: the PBO’s estimates put GDP growth at around 0.2 per cent in the second quarter and about 1% in the third. In the light of this performance, average growth for 2016 would be just under 1%.
- Growth is still driven by domestic demand, but it is slower than the actual expenditure potential of the economy. Since the start of the recovery, Italy’s purchasing power (command GDP) has increased appreciably (+2.6%) thanks to the fall in oil prices, but consumption and investment have expanded more slowly (+1.7%) because a significant proportion of the increase in purchasing power has been used to reconstitute household savings, repay loans and form reserves by firms.
- The British referendum has impacted the outlook for 2017. According to PBO simulations, the Brexit shock could reduce growth next year by 0.2-0.4 percentage points, depending on the severity of the impact on the financial markets and the supply of credit.
- The downward impulses originating in international markets for raw materials and the slow recovery in the economy have kept inflation in negative territory, depressing expectations. The share of goods and services in the Istat basket experiencing low inflation (year-on-year increases of less than 0.5%) exceeds 50%. At the same time, the percentage of households expecting stable or falling prices is close to 60%.
- Employment growth continues at a moderate pace, but the effects of the change in contribution relief are beginning to emerge. According to Istat data, in April-May, the increase in employment (+0.4% on the first quarter) was driven by fixed-term jobs (+2.3%); INPS data shows open-ended hiring falling sharply in the first 5 months of the year (-280,000 units compared with the same period of 2015).
