Italy’s Q3 GDP Revised Up to 0.1% q/q as Trade Lifts Growth, Industry Lags
Italy narrowly avoided stagnation in the third quarter, with final GDP revised to a 0.1% quarter-on-quarter gain, while annual growth accelerated to 0.6%—outpacing expectations. The composition points to firmer net exports offsetting a drag from inventories, a mix that’s unlikely to jar the ECB’s policy stance but offers a modest macro tailwind for risk sentiment in Europe.
Italy’s growth edges higher, but momentum is uneven
Istat’s final Q3 release (28 November 2025) shows the economy expanded 0.1% q/q, upgraded from a flat preliminary estimate. On an annual basis, output rose 0.6% y/y versus 0.4% expected, and compared with 0.4% y/y previously. The prior quarter’s q/q reading stood at -0.1%.
Beneath the headline, domestic demand contributed modestly once inventories are excluded: household and NPISH consumption added 0.1 percentage point, and gross fixed investment added another 0.1 ppt, while public-sector spending made no contribution. Net foreign demand was a notable positive (+0.5 ppts), offset by a sizable drag from inventories and valuables (-0.6 ppts).
On the supply side, value added rose in agriculture (+0.8%) and services (+0.2%), while industry contracted (-0.3%)—a reminder that Italy’s manufacturing backdrop remains soft even as services cushion the slowdown.
Markets: limited FX impulse, focus stays on ECB and inflation
For traders, the incremental upward revision is supportive at the margin, but not enough to reshape the broader euro-area narrative. The euro saw limited follow-through as rates markets and FX remain more sensitive to inflation dynamics and ECB guidance. With policymakers repeatedly signaling that the current policy setting is appropriate, a tenth-of-a-point growth upgrade in one member state does not materially shift rate expectations.
Italian government bonds remain in focus for spread traders: better external demand helps the growth mix, but a weak industrial pulse and inventory correction temper the signal. The BTP-Bund spread will likely key off upcoming euro-area inflation prints, fiscal headlines, and ECB communication, more than this revision alone. European equities may take the data as mildly risk-supportive, especially for domestically oriented services, while cyclicals tied to manufacturing could stay range-bound pending clearer signs of industrial recovery.
Macro takeaways for FX and risk assets
– The upgrade reduces hard-landing fears on the margin, but does not rewrite the eurozone cycle.
– A positive net trade contribution suggests external demand resilience, yet the inventory drag flags caution on future output.
– Sector divergence persists: services keep growth afloat as industry remains a headwind.
– For EUR crosses, near-term drivers remain inflation surprises, front-end yields, and peripheral spreads rather than single-country growth tweaks.
Key Points
- Italy’s Q3 GDP finalized at +0.1% q/q (up from 0.0% prelim); prior quarter was -0.1%.
- Annual growth accelerated to 0.6% y/y, beating the 0.4% consensus and prior 0.4%.
- Net exports contributed +0.5 ppts; inventories subtracted -0.6 ppts.
- Domestic demand ex-inventories added +0.2 ppts (consumption +0.1, investment +0.1; public spending 0.0).
- Sector split: agriculture +0.8%, services +0.2%, industry -0.3% q/q.
- ECB policy outlook unchanged; markets remain focused on inflation and spreads.
Outlook: what to watch next
The durability of Italy’s expansion will hinge on whether services maintain momentum and whether industry stabilizes after the inventory drawdown. For FX and rates, incoming euro-area CPI, PMIs, and guidance from Frankfurt will set the tone into year-end. In equities, any improvement in new orders or export-sensitive sectors would be the clearer catalyst than today’s marginal GDP revision, BPayNews notes.
FAQs
What did Istat report for Italy’s Q3 GDP?
Istat’s final estimate shows GDP grew 0.1% quarter-on-quarter in Q3 and 0.6% year-on-year, an upgrade from the preliminary flat q/q reading and above the 0.4% y/y consensus.
What drove the upside revision?
Net foreign demand was the standout positive, contributing +0.5 percentage points to growth. Domestic demand excluding inventories added +0.2 ppts, while a sharp inventory drawdown subtracted -0.6 ppts, indicating firms may have run down stock rather than ramped up production.
Which sectors performed best?
Agriculture and services expanded (+0.8% and +0.2% q/q respectively), while industry contracted (-0.3%), highlighting continued manufacturing softness.
Does this change the ECB outlook or EUR direction?
No. The move is too small to alter ECB policy expectations, which are anchored by inflation data and broader euro-area indicators. The euro and core rates markets are likely to react more to upcoming CPI releases and ECB communications than to this single-country GDP revision.
What’s the implication for Italian bonds and European equities?
The data are marginally supportive but unlikely to shift the trend. BTP-Bund spreads will remain sensitive to inflation prints and fiscal signals. Equities may see a slight lift in services-exposed names, while cyclicals tied to manufacturing could remain cautious until industrial indicators firm.
