GDP analysis shows that the main driver of growth is private consumption, which confirms to us that in the second quarter, the reopening effect was in full force. Unfortunately, this is expected to evaporate in the second half of the year Italy revised second quarter GDP growth estimates (up from preliminary estimates of 1%) and 6.3% YoY. This means that Italy’s GDP in the second quarter of 22 has reached pre-ancient levels. The supply side claims solid value-added growth in both industry and services, but contraction in agriculture. Private consumption is by far the strongest driver The most interesting part of today’s release is the demand analysis, which is not available at a rough estimate. This shows that the main driver of GDP growth strongly at 1.1% was private consumption (contributing 1.5%), followed by total fixed investment (contributing 0. %). Government spending (-0.2%), inventories (-0.3% contribution) and net exports (-0.2% contribution) all act as drags. A temporary reopening effect may have taken place, aided by a recovery in tourism What’s behind such a strong recovery in consumption? Most likely the reopening effect after lifting all Covid-19 restrictions. This has translated into a recovery in consumption of goods (as hinted by strong retail sales) and services, the latter of which could be fueled by a healthy recovery in inbound tourist flows. and international. This is despite strong consumer inflation, which is putting increasing pressure on real disposable income and is likely to be decisive in the second half of FY22. The sharp downturn in 3Q22 will turn into a recession in Q22 The big question now is how far this can continue. We believe the strong second quarter results will not continue and the sharp downturn will begin in the third quarter of 22, before the recession begins in the fourth quarter of the 22. Looking to the third quarter, we Still expect the decline in GDP to be narrowly avoided. Anecdotal evidence points to a continuation of the strong tourist season throughout the summer, with strong labor market data (unemployment rate dropped to 7.9% in July, when employment remained flat). mild) temporarily help households weather the inflation shock. However, business confidence data over the summer clearly pointed to further decline, largely in the manufacturing sector. Manufacturing could be a drag on growth in Q3, relying on services to drive growth. In the coming months, as the reopening effect fades and inflation is expected to remain close to current levels through year-end, we expect consumption to become a drag on growth. growth in the fourth quarter of year 22, leading to a contraction in GDP. As of today’s announcement, the statistical transfer rate for GDP growth in 2022 is 3.5%. We confirm an average GDP growth forecast of 3.3% in 2022 and a sharp decline to 0.2% in 2023.