GDP growth hits two-year high in Q1

GDP growth in line with the Euro area average: A second release confirmed that seasonally and calendar-adjusted GDP growth inched up to 0.3% in Q1 (Q4 2024: +0.2% qoq s.a.), marking the strongest result in two years and matching the Euro area average. On an annual seasonally and calendar-adjusted basis, economic growth rose to 0.7% in Q1 from 0.6% in Q4.

Exports rebound and supportive private consumption drive acceleration: Domestically, private spending expanded by 0.2% in sequential terms, matching the prior quarter’s reading and marking the third consecutive rise, supported by a lower unemployment rate and stronger wage growth. Moreover, fixed investment remained supportive, rising 1.6%, unchanged from Q4 and remaining in positive territory for the second consecutive quarter after almost a year of contraction; interest rate cuts from mid-2024 onwards likely buttressed the readings. That said, government spending dropped by 0.3% in Q1 (Q4 2024: +0.1% qoq s.a.)—following a gradual deceleration in the prior three quarters—likely weighed on by the European Commission’s excessive deficit procedure. On the external front, goods and services exports rebounded 2.8% in Q1 (Q4 2024: -0.1% qoq s.a.) after a year-long slump, supported by front-loaded shipments ahead of U.S. tariffs and a pickup in economic activity in Germany—Italy’s top trading partner. However, imports also bounced back, rising 2.6% (Q4: -0.2% qoq s.a.), partially offsetting the boost from stronger exports.

GDP growth to lose steam from current levels: Our Consensus is for sequential GDP growth to cool from current levels in Q2; heightened international trade uncertainty should weigh on economic activity. Nonetheless, solid wage gains and the ECB’s monetary easing are expected to bolster private consumption—with around one-third of household mortgages tied to variable interest rates. Meanwhile, in 2025 as a whole, economic growth will hover around 2024 levels and close to its pre-pandemic levels. On the one hand, private consumption should pick up thanks to recovering real disposable income and the ECB’s easing cycle. On the other hand, fixed investment should remain muted due to uncertainty connected with trade tensions and the phasing out of residential building incentives. An EU-U.S. trade war is a downside risk to GDP growth.

Panelist insight: Commenting on the outlook, ING’s Paolo Pizzoli stated: “The latest developments in the tariff saga, unfortunately, are not helping to alleviate uncertainty. A new judicial factor is now added to a complicated backdrop, where visibility on the state of negotiations between the US and the EU was already scarce. On a more positive note, the latest batch of confidence data points to a clear improvement among both consumers and service sector providers: a good omen for domestic demand. All in all, against a very uncertain backdrop, we continue to believe that a slowdown in quarterly GDP growth will materialise in the second quarter.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Italian GDP projections for the next ten years from a panel of 52 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Italian GDP.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Italian GDP projections.

Want to get access to the full dataset of Italian GDP forecasts? Send an email to info@focus-economics.com.