Economic Bulletin No. 3 - 2026

17 July 2026

The resumption of hostilities in the Middle East has sparked renewed tensions on the markets

Energy commodity prices rose again in July, after the announcement of a memorandum of understanding on 14 June had helped ease the upward pressures in the markets. Oil and natural gas prices remain higher than in the weeks prior to the outbreak of the conflict. Since mid-April, equity prices have recouped previous losses, driven above all by AI-related sectors. Sovereign yields have risen in anticipation of a tightening of monetary policy. The dollar has appreciated against the main currencies.

Global growth remains exposed to significant risks

In the United States, economic activity continues to be supported by investment in AI-related technologies and by private consumption. In China, exports continue to drive growth, while domestic demand is weak. World trade grew in the first quarter, buoyed by demand for AI-related goods, but is expected to slow in the second half of the year, affected by the supply chain tensions generated by the conflict in the Middle East. Uncertainty over the content, timing and implementation of a deal between the United States and Iran weighs on international trade. Rising energy prices are putting upward pressure on inflation in the main economies.

The outlook for growth and inflation in the euro area has worsened

In the first quarter of the year, the euro-area economy grew at the moderate pace of the previous months (0.3 per cent), net of the exceptional fluctuations in economic activity in Ireland. The Middle East crisis had a negative impact on GDP, which is estimated to have recorded modest growth in the spring months. According to the June Eurosystem staff projections, euro-area GDP is set to expand by 0.8 per cent in 2026, 1.2 per cent in 2027 and 1.5 per cent in 2028. Consumer price inflation is estimated to rise to 3.0 per cent in 2026, then fall to 2.3 per cent in 2027 and return to the target of 2.0 per cent in 2028.

Economic activity in Italy appears to have slowed in the second quarter

During the winter months, GDP continued to expand at a moderate pace (0.3 per cent). Capital formation appears to have softened and household consumption to have slowed in the second quarter, amid the conflict in the Middle East. According to our June projections, GDP will increase by 0.5 per cent in 2026, 0.4 per cent in 2027 and 0.9 per cent in 2028 in the baseline scenario, adjusting for calendar effects. Taking into account the better-than-expected growth in the first quarter, GDP could rise by 0.6 per cent this year. The surge in energy prices will cause Italy's energy deficit to widen.

Labour market conditions remain positive

Employment rose in the first half of the year. The unemployment rate fell further, hitting a new all-time low, while the participation rate was practically unchanged. Contractual wage growth remained moderate.

Rising energy prices have fuelled inflationary pressures

Inflation reached 3 per cent in the second quarter. The surge in energy prices caused by the Middle East crisis has had a limited impact on electricity and gas bills in Italy. The Government has repeatedly stepped in to counter the pressures on energy prices by temporarily cutting excise duties on fuels. According to our June projections, consumer price inflation will rise to 3.1 per cent on average this year, largely reflecting the higher energy prices, before returning to 2 per cent over the next two years.

Lending to firms continues to expand

Between February and May, lending to firms accelerated, while growth in loans to households remained stable. Interest rates rose on new loans to firms and, to a lesser extent, on new mortgage loans. Credit standards were virtually unchanged in the first quarter.

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