Italy's economic growth likely slowed in Q2, central bank says

Italy's economic growth likely decelerated in the second quarter of 2025 compared to Q1, when GDP expanded 0.3% quarter-over-quarter, according to the Bank of Italy. The central bank attributes this anticipated slowdown to reduced consumer and investment spending, alongside deteriorating sentiment and uncertainty related to U.S. tariffs. The official Q2 flash estimate from ISTAT is expected on July 30.

Analysis

The Bank of Italy has signaled a likely deceleration in the nation's economic growth for the second quarter of 2025, following a 0.3% quarter-over-quarter GDP expansion in Q1 2025. This anticipated slowdown is attributed to weakening domestic demand, specifically reduced consumer and investment spending. The central bank's report identifies deteriorating sentiment and high uncertainty stemming from U.S. tariffs as primary headwinds. The official flash GDP estimate from the National Statistics Bureau ISTAT, scheduled for release on July 30, will be a critical data point for validating this pessimistic outlook and assessing the near-term trajectory of the Italian economy.

Key Decisions for Investors

• Investors with exposure to Italian assets should consider hedging against potential downside risk ahead of the official Q2 GDP figures.
• The ISTAT data release on July 30 is a key catalyst; a worse-than-expected deceleration could negatively impact Italian equities and sovereign debt yields.
• A potential strategy involves reducing exposure to cyclical sectors, such as consumer discretionary and industrials, which are most vulnerable to the forecasted decline in spending and investment.