Italy falls into technical recession as economy contracts

Italy’s economy contracted for the second consecutive quarter at the end of last year, throwing the country into recession in a setback for the new anti-establishment government.

Gross domestic product fell a quarterly 0.2 per cent between October and December, following a 0.1 per cent decline in the third quarter, and was up 0.1 per cent on an annual basis, national statistics bureau ISTAT reported on Thursday. The fourth quarter decline was steeper than expected.

A Reuters survey of analysts had pointed to a 0.1 per cent fall quarter-on-quarter and a 0.3 per cent year-on-year rise.

Analysts often define two straight quarters of declining GDP as a “technical” recession, though the Italian economy grew in 2018 as a whole and is expected to expand modestly this year.

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Laggards

The data confirmed Italy's customary position among the growth laggards of the euro zone. The 19-nation bloc grew a listless 0.2 per cent in the fourth quarter, Eurostat said, in line with market expectations. That was the same rate as in the third quarter, which had been the lowest for four years, while the euro zone's 1.2 per cent year-on-year expansion was a new five-year low.

The data presents a quandary for the European Central Bank, which ended its bond-buying stimulus programme late last year and risks running low on firepower as the economy slows.

– Reuters