It was expected. The data on GDP for the second quarter released this morning by DeStatis, the German statistical institute, and Istat confirm a slowdown in the pace of growth both in Germany and in Italy. Quarter-on-quarter growth fell from +0,7% to +0,4% in Germany and from +0,3% to zero in Italy. Previously, a decrease had been communicated for France by INSEE, from +0,7% to zero. All three of the major economies in the euro area are slowing down, in a context where less than a month ago the International Monetary Fund corrected its 2016 estimates of world trade expansion by almost half a point.
The GDP numbers in the second quarter are not affected by the consequences of Brexit, sanctioned by the result of the referendum of 24 June. Looking at the coming quarters, the forecasters surveyed in the August issue of the authoritative "Consensus" hypothesize that in 2017, UK GDP growth could drop to +0,6% as a result of Brexit compared to a forecast of +2,2 % that was done just three months ago. However, the Consensus average rules out the possibility of a recession in the UK. Looking at the final data, in the second quarter of 2016 the GDP of the United Kingdom appears to have grown by a round +0,6% on the previous quarter and by +2,2% on the corresponding period of the previous year.
With regard to Italy, the Istat press release refers to "a positive contribution from net foreign demand". Considering the results of trade, the positive contribution of net foreign demand testifies to the relative resilience of Italian exports to move in the difficult context of slowdown in world trade. Between the first and second quarters of 2016, the volume index of Italian exports grew by twice that of imports, while a substantial invariance was recorded by the evolution of the average unit values of both exports and imports. On a trend basis and considering the overall trade values, in the second quarter of 2016 Italian exports grew by 2,7% compared to the second quarter of 2015 while the increase in imports stopped at +1,6%.
Again the Istat press release underlines how the Italian GDP figure for the second quarter of 2016 reflects a slight negative contribution from national demand. While waiting to find out the breakdown between household consumption and business investment, it is worth recalling that the delay in the recovery of fixed investment has characterized the recovery path of the Italian economy for some time. This is especially true for the construction investment component which in Italy in the first quarter of 2016 was 37 percentage points lower than the pre-crisis volumes against, for example, a situation in France where construction investment is (data from the first quarter of 2016) only 14 percentage points below the figure for the first quarter of 2008.
Overall, the GDP data for the second quarter of 2016 signal, not only for Italy, a weakness in the economy whose findings should be read in the context of the various degrees of anti-cyclical support offered by the fiscal policy "stance". For the record, according to the projections of the European Commission, the ratio between public deficit and GDP in 2016 will be 2,4% in Italy, significantly below the 3,4% expected for France and 3,9% for Spain . A lower value of the ratio between public deficit and GDP characterized the Italian performance in all eight years between 2008 and 2015 and is also projected in the official scenarios formulated for 2017.
Looking ahead, the GDP data for the second quarter indicate the importance that the formulation of public finance maneuvers for 2017 will assume to revive the tone of the recovery in Italy as in the other economies of the euro area. Balance and farsightedness will be necessary to ensure the necessary compendium between the needs of stability enshrined in the rules of the Fiscal Compact and the no less relevant requests for the consolidation of growth.
Better economic growth – obtained through structural reforms, fiscal policy and investments – will help the recovery path of the high level of non-performing loans of Italian banks: a recovery that the data on the formation of new NPLs say is already started by some quarters and which could now also become evident in the trend of the stock of gross non-performing loans.
