Pace of Italy's GDP expansion likely to remain same in Q2

Italy's recovery from a 3yr recession was led by the non-tradable sector, against the backdrop of disappointing global demand and little external adjustment. In Q1, domestic demand expanded, while net trade contribution was negative amid strong imports offsetting weak exports. 

Private consumption surprisingly edged down, while investment accelerated 1.5% q/q. Restocking added 0.5pp to the quarterly rate of growth, almost offsetting the negative Q4 impact. 

Looking ahead, recent June consumer and business confidence data are consistent with the view that the pace of GDP expansion is likely to remain similar to Q1. Private consumption should benefit from low inflation, improving labour market and lending conditions and maintenance of the current neutral fiscal policy stance. 

"Also, exports are expected to resume, fuelled by a weak euro and strengthening of global demand, including from the US economy which absorbs about 20% of Italian exports outside the EU", says Barclays.