Italy economic growth remains flat in Q2, stalls expectations of a rise

Italy’s economic growth remained flat during the second quarter, stalling market expectations of a rise. This is expected to further weigh on Prime Minister Matteo Renzi as he prepares for a referendum on which he has supposedly staked his political future.

Italy’s GDP remained unchanged in the three months through June, data released by the Rome-based statistics agency Istat showed Friday, compared with the 0.2 percent median estimate in a Bloomberg survey of 25 analysts. However, the economy grew 0.7 percent from a year earlier.

Further, Istat noted that the second-quarter reading stemmed from an expansion in the agriculture and service sectors, offset by a contraction in the industrial sector. Domestic demand slightly contracted, but that was offset by a growth in foreign demand.

In addition, German growth slowed less than analysts predicted in the second quarter, the Federal Statistics Office in Wiesbaden said earlier on Friday. GDP in the euro region’s largest economy rose a seasonally-adjusted 0.4 percent, twice the rate forecast in a Bloomberg survey.

The Bank of Italy and the International Monetary Fund have both revised down their economic outlook, predicting growth of less than 1 percent this year, amid an environment of political uncertainty ahead of a referendum that is threatening citizens to topple the government.

Meanwhile, unemployment in Italy remains above 11 percent and unexpectedly increased in June. Industrial production declined the most in almost two years in the second quarter, Istat said in a separate report last week.