Schroders: Italy in triple-dip recession

The fall in Q2 GDP comes as a surprise as consensus estimates expected 0.1% growth. Few details have been released with this initial estimate, but we know that industrial production including manufacturing fell by 0.4% over the second quarter, while retail sales have been broadly flat.  The latest contraction puts the level of Italian GDP 9.1% below its previous pre-financial crisis peak in Q3 2007.

The latest news will come as a severe blow for Matteo Renzi and his party, who have been slow to implement substantial macro reforms and instead been pre-occupied with politics. Meanwhile, neighbours Spain are putting Italy to shame, as early estimates there show growth of 0.7% in the second quarter.

It has been difficult to distinguish between peripheral Europe for some time, but what we have seen this year is the outperformance of countries that have implemented structural reforms and improved their competitiveness, like Spain and Ireland. Meanwhile countries that have been slow and unwilling to embrace reforms, such as Italy and France, have been a drag on the wider eurozone economy.