Italian Economy Expands in Boost for Renzi Before ReferendumBy and
GDP grows 0.3% in three months through September after flat 2Q
On annual basis, Italy’s growth is second-lowest in euro area
Italy’s economy returned to growth in the third quarter, expanding more than expected and boosting Prime Minister Matteo Renzi before next month’s referendum that might decide his political future.
Gross domestic product rose 0.3 percent in the three months through September after stalling in the previous quarter, the Rome-based statistics agency Istat said in a preliminary report on Tuesday. That was above the 0.2 percent estimate of 28 analysts in a Bloomberg survey. GDP expanded 0.9 percent from the same quarter of 2015, the report also said.
Renzi faces the key vote in less than three weeks, as he seeks to make Italy’s recovery from recession sustainable. All polls this month signaled that Italians will reject the government’s constitutional reform in the Dec. 4 referendum. That outcome could potentially spark a government crisis as the premier has said that he would resign if the plan is defeated.
“Renzi can certainly maintain that the economy is doing fairly well and this also thanks to his government’s policies,” said economist Raffaella Tenconi, founder of London-based consultancy ADA. “Still, voters are unlikely to change their view that the economy is fundamentally stagnant -- also there is a widespread perception that a clear growth strategy is missing.”
The GDP growth in the third quarter is the result of “an increase in the added value of the industry sector and services, and of a decline of agriculture,” the statistics institute said in the report on Tuesday. While Istat did not provide a full breakdown, it will do so in its final reading on Dec. 1, just three days before the referendum.
As Italy faces mounting challenges especially in its banking industry, Milan’s FTSE MIB stock index has plunged almost 20 percent so far this year. The yield on the 10-year bond has risen to over 2 percent, the highest since July 2015.
Even though Italy’s GDP quarterly growth matched for the first time since mid-2013 the euro-zone figure, the country’s year-on-year economic expansion ranked as the currency bloc’s second-lowest after Latvia’s, data from the European Union’s statistics office released on Tuesday show.
In the third quarter Italy’s industrial output grew 1.2 percent from the previous three months, Istat said last week. Still, production fell 0.8 percent in September, weakening prospects for an economic pickup in the rest of 2016.
Daniele Antonucci, senior European economist for Morgan Stanley & Co. in London, said in a note to clients that he doubts the recent GDP trend can last. The “manufacturing output has now lost strength once again, thus suggesting that economic growth isn’t really accelerating from here,” he said after the report on Tuesday.
The statistics agency itself signaled earlier this month that the the pick-up may be short-lived. Istat’s leading indicator does not signal “a further acceleration of the economic activity” in the fourth quarter, its head Giorgio Alleva told lawmakers in Rome at a hearing on Nov. 7.
A slowdown in economic growth might hinder Italy’s efforts to contain its public debt, the second-biggest in the euro region as a ratio of GDP. Renzi’s government committed to reduce the ratio starting this year, before acknowledging in September that the goal was out of reach. It reiterated that target for 2017, when it aims at cutting the debt-to-GDP to 132.5 percent from 132.8 percent this year.
— With assistance by Giovanni Salzano, Ross Larsen, and Ainhoa Goyeneche