The economy was even weaker than originally reported in the second quarter. Quarterly growth was revised a tick lower to minus 0.4 percent, its worst performance since the Covid-inspired contraction in the April-June period of 2020. As a result, annual growth was reduced to 0.4 percent, down sharply from the 2.0 percent seen in the previous period.

Household consumption was flat on the quarter while gross fixed capital formation declined a sizeable 1.8 percent as residential investment dropped 3.4 percent and machinery and equipment 0.2 percent. Government current spending was also down 1.6 percent while both exports and imports decreased 0.4 percent.

The revised national accounts underline the weakness of private sector domestic demand and business and consumer surveys suggest no significant improvement in the current period. The Italian economy could well be in recession before the end of the year. Today's update puts the Italian ECDI at 18 but the outperformance of overall economic activity solely reflects surprisingly firm prices. At minus 7, the ECDI-P shows that the real economy is falling a little short of market expectations.

No revision is expected to the flash data leaving a 0.3 percent quarterly contraction and a 0.6 percent annual growth rate.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. A flash estimate, providing just quarterly and annual growth rates together with some limited qualitative information on sector output, is usually available 6-7 weeks after the reference quarter.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.