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Friday, December 07, 2007

Italy Q3 2007 GDP Breakdown

Well, today, courtesy of ISTAT, we got the breakdown on Italy's Third quarter GDP.

As we can see, quarter on quarter growth was up slightly from Q2, although the underlying trend is obviously down.

So the question is, what is dragging things down and what is pulling things up? Well one of the big downside issues is definitely the surge in imports.

And in Italy's case I think we know the culprit: the high value of the euro. Faced with this surge in the relative value of the euro Italian exporters simply can't hack it, even in the eurozone, or among the EU10 effective peggers. The strength of ex-zone competition in some of Italy's key export areas is just too strong. In fact exports did not have a bad quarter, since they rose 0,9% q-o-q, but this was completely dwarfed by the 2.4% q-o-q surge in imports.

Household spending, which makes up two-thirds of Italy's economy, grew slightly (by 0.2 percent) but was down when compared with the 0.5 percent rise achieved in the second quarter, or the 0.7% one in the first quarter.

Be all this as it may, Italian domestic consumption, despite the increase in the working population via immigration and the low levels of unemployment registered recently, remains very weak.

As can be seen, Italian household consumption has been congenitally weak over a number of years now, and the only real bright spot has been at the end of 2006 and the begining of 2007. This took me by surprise I must admit, and mirrors what we have also seen in Germany and Japan, and it was undoubtedly this phenomenon that lead to all the speculation about uncoupling, but now, as we are seeing, things are returning pretty much to where we left off a couple of years back, which I think is important.

Due to the similarity in the structural components here between Germany, Japan and Italy (with Italy's weaker export performance being the only real distinguishing feature) Claus Vistesen and I are arguing that all of this is age related, and so just to close on a novel note, here are the comparative median ages for Germany, Italy and Japan, for 1990 to 2020 (click on image for slightly better viewing). This is definitely one area where all 3 are world leaders.

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