Barclays: Weak demand to keep Italy’s GDP negative until 2013
Italy’s GDP contraction in 2012 will be mainly driven by weak domestic components. This is in contrast to 2009, when Italy’s real GDP negative 5.5% growth was led by sharp deterioration in foreign demand, according to Fabio Fois, European economist at Barclays Capital.
While we continue to think that Italy will not suffer a recession as severe as in 2009, we anticipate that the recovery is likely to be soft. We forecast GDP to contract by 2.3% in 2012 and we project a decline in GDP growth of -0.4% also in 2013,” he said.
Unless foreign demand strengthens radically in the next few quarters, subdued final domestic demand conditions are likely to contribute to keep Italy in recessionary territory in 2013 as well.
“The forces which have impaired final domestic demand so far are unlikely to fade any time soon; however, we anticipate that their negative impact is likely to moderate over time. In particular, we expect the unemployment rate to keep increasing over the next few quarters (we forecast it to reach 11.7% next year from a projected 10.9% this year; 2011: 8.4%), fiscal austerity to be rigorously implemented by the government and also general confidence/appetite of consumers to remain downbeat,” he added.
Consumer demand data seem to be consistent with this view. In July, headline nominal retail sales declined by 0.2% below consensus expectations for a flat reading and following a +0.4% increase in June.
In addition to that, consumer confidence data also suggested that appetite for consumption is unlikely to resume in the coming quarters.
“In September, consumer confidence data were still close to all-time lows of 85.4, back to 1982, reached in June this year,” Fois said.