Q2 Italian Growth Improves While Spanish Growth Tapers

Italian economic growth came in at 1.5% from the previous year, in line with expectations, but an improvement from the first quarter’s growth of 1.2%.

Of particular encouragement was the economic expansion while government spending contracted. Consumer spending showed strength, but so did business investment and export growth.

August’s Markit PMI seemed to confirm the strong data and showed continued expansion in the Italian manufacturing sector. August’s reading of 56.3 was an improvement from July’s reading of 55.1. Any reading about 50 indicates expansion. The survey showed strength in new orders and employment, but also in the length of time for suppliers to fulfill orders. That generally indicates that manufacturers’ resources are becoming more stretched and could be a harbinger for more investment and employment growth.

IHS Markit’s Chief European economist Claus Vistesen commented on the numbers: “both domestic demand and export orders boosted growth, pushing work backlogs and employment higher. This headline is in sync with other data showing that the business sector in Italy is in good form, while consumers are facing headwinds due to weakness in real wages.”

Import prices also ticked higher in August in Italy, but July’s reading was at a nine month low and that, combined with the strong Euro, limits any current fears of a pick-up in inflation.

Meanwhile, Spanish growth was tamed somewhat in August, although the country has recorded some of the best economic numbers in Europe throughout 2017. August’s reading of 52.4 fell from July’s 54.0, but still indicated expansion.

Commenting on the Spanish numbers, Andrew Harker, associate director at IHS Markit, said the signals from the survey were “mixed”, with sub-indices for output and new orders at their weakest in almost a year, which he said pointed to a loss of momentum which would become worrying if sustained over the next few months.




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