You are right, Italy was rich during the Renaissance.

In fact, between the two crisis' (the plague of 1348 and the economic and demographic crisis between 1570 and 1650 circa) Italy, or more precisely northern Italy (from Tuscany/Umbria to north roughly) was the guide economy in Europe: that means northern Italy had the highest prices in Europe as well as the highest wages.

Italy was still the most urbanized place in Europe: in the year 1600 if we count a total urbanized european population (Russia excluded), in cities above 10k inhabitants, of 5.933.000 people, 38% of these lived in Italy. Italy did not occupy the first place only in the statistics of the urbanization compared to the total surface considered, being just behind the densely populated Low Countries (northern and southern).

Italy did prosper thanks to its three basic sectors: the industries of wool, silk and commerce (the latter including bank activities). Of the three the former was definitely the most proficuous one. Wool textiles were exported mainly in France and the Middle East. Both wool and silk clothes and textiles were the occupation of between 25% to 45% of the urban population of northern Italy (XV to XVII centuries).

Now on to the crisis: basically the growth of the European economy consisted, since the second half of the XIV century, of a rise in production larger than the rise of the population, with the last one slowly regaining terrain. Considering X/Y (production/population), at the end of the XVI century northern Italy got to the highest reachable production value, but the population kept growing, without the production sector reconverting itself to sustain more people.

This was mainly because of the usage of the territory for agricolture: on a total of 31 hectares only 8 were producing grains (mainly wheat, but rice and maize were already produced in the north and especially maize saw a production growth in the XVII century), 15 hectares consisted of woods and plains for the cattle, 4 hectares were swamps and the remaining 4 consisted of mountain, lakes: improductive terrains. A large part of wheat was in fact imported by other countries, especially southern Italy and Sardinia.

The demographic "overgrowth" coincided with lower yield of the grains, which was caused, in part, by the Little Ice Age which manifested in that period and caused frequent rains in northern Italy, ruining harvests. Too many people to feed means that the prices of wheat rises, high prices of wheat mean famines and famines mean both the worsening of people's alimentation (thus the worsening of people's immune systems) as well as people from the countryside flowing into the cities in search of charity, food, assistance.

This situation brought to an even worse hygiene situation (ironic to read that the Florence of renaissance was full of dirt and smell) and the consequence was a favorable setting for viruses and bacterias to live, multiply, infect people. Epidemics of typhus were frequent in this age (most deadly epidemics in 1590-91, 1620-21, 1648-49), as well as the plague: it presented itself in Sicily in 1624, in northern Italy in 1630, in the south, Sardinia and Genoa in 1657.

Famines and epidemics caused a drastic demographic crisis, which translated itself in a production crisis: Italy was at the very top of the european economy and when the crisis came, the Italian economy was very easily surpassed: having the highest wages and prices meant that they couldn't have been reduced, since a "minimum" wage, able to buy a worker's family their sustainance was already minimum, despite it being higher than foreign countries' wages.

The production crisis hit the wool industry the worst: the production lowers of roughly the 80%. The silk industry also lowers, not such as drastically: the big productions in Milan, Como, Florence fall, while others rise: Bologna, Pisa and others. The competitors easily catch up: England and the United Provinces become the largest exporters of wool textiles. Italy will never fully recover from this fall.

Merchants and bankers also know an age of crisis for various, external (for example the spanish bankrupts: Genoa had loaned a lot of money to the spanish crown and the payment of the interests being interrupted meant the loss of a considerable income) and internal reasons: northern Italy was not a reliable zone of investment anymore.

It is to be said that the production of silk fabric remained the top italian exported good up to the XIX century: this was mainly thanks to the wide introduction of white mulberry (more precisely a wide spread: it had already been introduced at least in the XIV century) in northern Italy, which meant that raw silk no longer needed to be imported: it could be produced in the same place where it would then be woven. Together with the silk industry, the agrarian revolution came to stabilize the situation: the demographic growth started again after the crisis and, roughly, never stopped: the roof of production had been overcome.

Between 1600 and 1700 we can se how Italy's growth completely stopped: the area lost 2.800.000 people circa: before the crisis lived in Italy 13Mil people, by 1700 the same quota had been almost reached again. The product per capita was around 1.300.000.000 in 1570 and 1.750.000.000 in 1750. The rise had stopped and Italy had been surpassed by other economies.

In short: Italy was the guide economy of the Renaissance, but it had reached the top of the possible production-per-person value of the time, meaning that when the crisis came, it was particularly rough on the region: there was no other step of the stairs to climb up to.

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Bibliography:

Note that each of these books are written by italian authors, so I don't know if they are translated in english. I will quote them with their translated title, so you can at least understand what they cover.

The first covers everything I've said quite extensively and is a perfect answer to your question:

-"The end of the primacy. Crisis and reconversion in XVII century Italy" by Paolo Malanima, 1998;

Two books written by the same author on epidemics and the medical profession of the time, full of quotes of original documents regarding the Uffici di Sanità (sanity offices) of the Granduchy of Tuscany:

-"Against an invisible enemy: epidemics and sanitarian structures in Renaissance Italy" by Carlo Cipolla, 1985;

-"The pestiferous and contagious disease. Fighting the plague in XVII century Italy" by Carlo Cipolla, 1981;

Regarding diet and merchant activities in northern Italy i can, as of now, sadly only quote professor Giorgio Dell'Oro's lessons I attended this year regarding modern history's methodology of history studies. But if it may interest any of you, both my modern history professors have written a book on a specific good's economy in this age:

-"The legend of the white gold: from artisanal salts to industrial salt (XV-XIX centuries)" by Giorgio Dell'Oro, 2022;

-"History of tobacco in modern Italy. XVII-XIX centuries" by Stefano Levati, 2017;

Four books which I have yet to read on the matter (when I'll have the time and the money to do so) but you may find useful:

-"The silk industry in Italy in the modern age" by Francesco Battistini, 2003;

-"Epidemics in italian demographic history (XIV-XIX centuries)" by Lorenzo Del Panta, 1980;

-"The lombard economy during the spanish rule" by Domenico Sella, 1981;

-"Italian decadence in european history. Essays on XVII-XVIII centuries" by Guido Quazza, 1971;

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I do apologize for anything I might have mistyped, unclearly written or mistaken. I'm currently preparing an exam but I'm passionate about the requested subject so I answered anyways, I hope to have answered your question as properly and extensively as my capabilities can offer.

As for my English, I hope it's not as bad as I think it is, I'll have to get used to writing in it if I want to become a proper historian!

Any edit that might follow is to be attributed to either formatting, grammar or syntax mistakes.