Italy's economy weathering Iran war better than expected, data suggests

By Antonella Cinelli

ROME, July 30 (Reuters) - The Italian economy grew by 0.2% in the second quarter from the previous three months, preliminary data showed on Thursday, a slightly stronger reading than expected that supports the outlook for this year.

On a year-on-year basis, gross domestic product in the euro zone's third largest economy was up 1.0% between April and June, national statistics bureau ISTAT said, more significantly above expectations.

A Reuters survey of 26 economists had forecast a 0.1% rise quarter-on-quarter and a 0.7% increase year-on-year.

The data suggests Italy is holding up better than many forecasters feared in the face of the surge in energy costs linked with the conflict in Iran.

"Despite the negative international backdrop the Italian economy is growing more than anticipated and more than under our own prudent public finance forecasts," Economy Minister Giancarlo Giorgetti said in a statement.

The quarter-on-quarter growth between April and June was the result of a positive contribution from domestic demand which more than offset a drag on growth from trade flows, ISTAT said.

It gave no numerical breakdown of components with its preliminary estimate, but said services expanded, while both industry and agriculture contracted.

So-called "acquired growth" stood at 0.8% at the end of the second quarter, up from 0.6% after Q1.

This means that even if GDP is flat in each of the remaining two quarters of 2026, full-year growth will be up 0.8% from 2025, adjusted for the number of days worked.

Italy has an official full-year forecast of 0.6%, though this is not adjusted for the number of working days.

In 2025 Italy grew by 0.5%, under the same accounting methodology.

Giorgia Meloni's government forecasts growth rates of 0.6% in 2027 and 0.8% in 2028, which would mark six consecutive years of sub-1% growth.

(Reporting by Antonella Cinelli, graphic by Stefano Bernabei, editing by Gavin Jones)