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“The estimates of the short-term models of the PBO indicate a weak, almost stagnant economic situation for the third quarter, with a GDP substantially unchanged compared to the previous quarter”. This was stated by the Parliamentary Budget Office in the October Economic Note.
“In the final part of the year, the production dynamic should gradually strengthen. The GDP growth forecast for the whole of 2025 is confirmed at around 0.5%, as indicated by the PBO on the occasion of the validation of the macroeconomic scenario of the 2025 Public Finance Policy Document (DPFP), but the prospects – warns the Public Accounts Authority – are characterized by significant risks, above all due to the fragmented international context”.
“Italian inflation (NIC), stable at 1.6% in September, is confirmed to be lower than that of the euro area, with a differential that has recently widened marginally, highlights the PBO. As regards the labor market, however, there is “a stability in employment in the spring months, with a decrease in employed workers offset by the increase in self-employed workers”.
“The older component of workers (50-64 years old) has grown due to the joint effect of the demographic transition and more stringent retirement requirements; however, the reduction in the share of younger workers has been accentuated – observes the PBO – while the already significant area of inactive workers has expanded. In the third quarter, according to preliminary indications, employment levels rose just by 0.1%”.
The Parliamentary Budget Office also notes that “the dynamics of hourly contractual wages in the second quarter moderated, particularly in the private sector against an acceleration in those of the public sector. Overall, wages slowed to 3.2 percent on an annual basis and, to date, wages in real terms still remain significantly lower than the average values of 2020 (-8.8%)”. Inflation and employment, however, are “stable”.
“In an international context that remains unstable, trade slowed down sharply in the second quarter of 2025, after a first part of the year strongly supported by imports from the United States. The effects of US duties do not yet appear tangible on prices but the tariff tightening will unfold its effects over time”, continues the PBO.
“Furthermore, combined with the appreciation of the euro against the dollar, already by 13% since the beginning of the year, they represent a clear loss of competitiveness for European exporters. Recent information in fact indicates a marked slowdown in euro area exports since last April and in August there was a clear decline on an annual basis in flows to the United States and China (by 22.2 and 11.3% respectively). Duty and exchange rate unfavorable, combined, can lead to an additional burden of approximately 30% for an American importer, compared to 2024”.
“The International Monetary Fund (IMF) has improved its expectations for this year, and has instead reduced those for GDP growth in the euro area for 2026; the hypotheses that influence the forecasts are very uncertain, so the estimates could change, even rapidly”, warns the PBO, adding that “the prices of energy raw materials remain at low values but price volatility could worsen in the coming months. The banks central banks (ECB and Fed) remain cautious on the path to easing monetary conditions, whose developments will depend above all on the evolution of inflation. That of the euro area continues to converge towards the objectives of the European Central Bank (2.0%), although it is growing especially in Germany and Spain. For the United States, inflation expectations remain higher than those in Europe, but do not appear to have been strongly influenced by the Administration’s trade war USA”.
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