Italy’s GDP Stagnates in Third Quarter, Missing 0.1% Growth Forecast
Key Facts
Italy’s National Institute of Statistics, Istat, said on October 30 that gross domestic product was unchanged in the third quarter of 2026 from the previous quarter and rose 0.8% year on year. The quarterly reading fell short of a Reuters poll of 28 economists, who had forecast growth of 0.1% quarter on quarter and 0.9% year on year. The quarterly growth anticipated by poll participants therefore did not materialize, while the annual increase was below their expectations. GDP had grown 0.2% quarter on quarter in the second quarter and 0.3% in the first, while annual growth was 1.0% in the second quarter and 0.8% in the first. The latest result puts the economy at a lower annual pace than in the previous quarter, with quarterly expansion coming to a halt.
Istat attributed the unchanged GDP to diverging sector performance, with value added rising in services and agriculture and falling in industry. The preliminary estimate did not provide separate rates for these sectoral movements, but said their opposing trends explained the unchanged quarterly total. On the expenditure side, domestic demand excluding inventories contributed positively to GDP, while net external demand made a negative contribution. This means domestic demand supported activity but did not prevent foreign trade from weighing on the total. The preliminary estimate did not specify the size of either contribution in the third quarter.
The reading follows quarterly growth of 0.2% in the second quarter, after an increase of 0.3% in the first quarter, according to figures reported by Reuters. Year-on-year growth slowed from 1.0% in the second quarter to 0.8% in the third, matching the pace in the first quarter. Istat said the third quarter had four more working days than the previous quarter and one more working day than the same quarter of 2025. Calendar-adjusted carry-over growth for 2026 stood at 0.8% following the third-quarter estimate. This rate measures the growth that would be recorded for the year if GDP remained at its current level through the end of 2026.
Indicators published before the GDP estimate presented a mixed picture of confidence in October: the economic sentiment indicator, or ESI, compiled by Istat rose to 96.6 points from 95.9 in September. By contrast, the manufacturing confidence index held steady at 91.9 points. On annual growth projections, the Italian government earlier raised its 2026 GDP growth target to 1% from 0.6%, according to Reuters. The government forecast growth of 0.8% in 2027 and 0.9% in 2028. The unchanged quarterly reading and carry-over growth rate of 0.8% are below the government’s 2026 target, while quarterly estimates alone do not amount to a new annual forecast.
The Bank of Italy said in its economic bulletin that economic activity slowed slightly during the summer months amid uncertainty linked to international tensions and rising energy costs. It added that investment in the digital transition, energy and tourism contributed positively to GDP growth. It also said employment grew in the second quarter, particularly in private services, but appears to have changed little in the third quarter. The bank forecast GDP growth of 0.9% in 2026, followed by 0.7% in 2027 and 0.8% in 2028. Istat has scheduled January 29, 2027, for its next release concerning the preliminary estimate of third-quarter GDP.