In the second quarter, Italy’s GDP growth of 1% q/q substantially beat consensus and pushed GDP above its pre-pandemic level (Figure 1). A breakdown into components isn’t available yet, but the statistics office stated that domestic demand was the driver, while net foreign demand made a negative contribution. This boost from domestic demand at least partly stems from the reopening of the economy. Meanwhile, the labour market has also continued to improve, with the unemployment rate (8.1%) some 1.5 percentage points below pre-pandemic levels and a record-high employment rate of 60.1%. {charts} Cost pressures are a ... (full story)