Italy GDP Grows More than Expected

The Italian GDP expanded by 0.3% in the first quarter of 2026, maintaining the pace of growth from the earlier period and revised above the 0.2% increase penned in the preliminary estimate, further beating expectations of a 0.1% growth rate. The GDP was carried by a 0.4% expansion in domestic expenditure, with household consumption rising 0.5% while public expenditure stalled. In the meantime, gross fixed investment expanded by 0.7%, as a 2.7% drop in residential development was offset by a 1.3% increase in non-residential investments. Meanwhile, net foreign demand contributed to a 0.9 percentage point increase in the GDP growth figure, as exports grew by 2.2% in the period while imports fell by 0.7%. This offset a 1.1 percentage point drag on the GDP growth figure from negative changes to inventory. From the previous year, the first quarter GDP expanded by 0.8%.

The Italian GDP expanded by 0.2% from the previous quarter in the first quarter of 2026, above expectations of a 0.1% expansion, according to a preliminary estimate conducted by ISTAT. Growth was recorded in net exports, despite the elevated prices of energy that Italy imports during the final month of the quarter, which offset a negative contribution from changes in inventories. The GDP expanded by 0.8% from the previous year. When annualizing the growth rate, the data indicated a 0.5% expansion for 2026. This is a slowdown with the 0.7% from 2025 and aligned with the updated 0.5% projected by the Bank of Italy, but below the 0.8% projections from ISTAT and the EU, of which were made before the outbreak of war in the Middle East pressured the European economy.

The Italian GDP expanded by 0.3% from the previous quarter in the final three months of 2025, confirming the preliminary estimate released earlier and slightly ahead of the initial market expectations of a 0.1% expansion. The economy was supported by gross fixed investment in the period (0.9%), with housing (7.1%) offsetting non-residential capital formation (-1.8%). In the meantime, household consumption (0.1%) and government expenditure (0.2%) were both slightly higher. Net foreign demand contributed negatively to the GDP growth as imports rose by 1% and exports contracted by 1.2%, reflecting the impact of trade disputes with the US started by the tariffs from Washington. The GDP expanded by 0.5% in the full year, slightly below the Bank of Italy's forecast of 0.6%.