World trade has continued to improve and GDP growth in 2017 Q1 rebounded in a number of emerging countries and accelerated in the EMU.
For the Euro area, the latest industrial production data confirm the good momentum. The economic recovery is projected to continue at a fast pace, thanks to a favorable external context and a more sustained domestic demand.
US short term indicators do anticipate a positive GDP rebound in 2017 Q2, but we expect weaker growth and a weaker dollar in 2017 and 2018 due to a less expansionary fiscal policy compared to our May forecast.
Data on the Chinese economy show that activity continued to increase at a very robust pace, but public spending is being contained, anticipating a deceleration of the GDP growth rate in the second half of 2017.
Overall, the global economic recovery is projected to expand slightly faster than we anticipated in our May Brief (Chart 1).
Italy, positive surprises
The latest data for 2017 Q1 revised GDP growth rate upwards to 0.4 per cent qoq, from 0.2 in the previous release, and from 0.2 to 0.3 per cent growth in 2016 Q4 (Chart 2). Some statistical factors suggest that these modifications should be considered with some caution.
We have revised our projection of GDP growth for 2017 upwards from 0.9 per cent to 1.2, the highest rate since 2010.
Energy and unprocessed food continued to reduce consumer inflation in June, while core inflation increased, also reflecting the expansion in household consumption.
Our projection sees Italy moving to a moderate fiscal tightening from 2018, aimed at reducing the debt-to GDP ratio.
Our two InFocus report the impact on the budget deficit of a higher than expected increase in interest rates and the recent rescue of the two Venetian banks.