Italy’s economy stagnates in Q3, but inflation slows sharply
2023.10.31 12:32
© Reuters. FILE PHOTO: Italy’s Prime Minister Giorgia Meloni gestures on the day of the informal meeting of European heads of state or government takes place in Granada, Spain October 6, 2023. REUTERS/Juan Medina/File Photo
By Gavin Jones and Antonella Cinelli
ROME (Reuters) – Italy’s economy stagnated in the third quarter from the previous three months, preliminary data showed on Tuesday, a weaker reading than expected following a 0.4% contraction in the second quarter.
On a year-on-year basis, gross domestic product in the euro zone’s third largest economy was also flat, national statistics bureau ISTAT reported.
A Reuters survey of 24 analysts had forecast a 0.1% quarterly increase and an identical 0.1% rise compared with the year earlier.
The flash data showed that in the April to September period Italy avoided by a whisker a so-called technical recession, defined by economists as two consecutive quarters of falling GDP.
Looking ahead, the outlook remains clouded by European Central Bank interest hikes aimed at curbing inflation and geopolitical tensions linked to the conflicts in Ukraine and most recently in the Middle East.
Giorgia Meloni’s government is also having difficulty meeting policy conditions set by the European Commission for the transfer of billions of euros of COVID-19 pandemic recovery funds, and is behind schedule in investing the sums it has already received.
More positively, Italian inflation slowed sharply in October, ISTAT said in a separate report.
The country’s EU-harmonised consumer price index (HICP) rose 1.9% year-on-year following a 5.6% rate in September to post its lowest reading since July 2021.
Core inflation, excluding the volatile fresh food and energy sectors, was running far higher at 4.5% in October but still eased compared with 4.9% the month before.
The Treasury last month trimmed its forecast for full-year 2023 GDP growth to 0.8% from 1.0% and cut next year’s forecast to 1.2% from 1.5%.
ISTAT said the flat GDP reading in the third quarter compared with the previous three months was the result of shrinking domestic demand, offset by positive net exports.
It gave no numerical breakdown of components with its preliminary estimate, but said industry had expanded, services had stagnated and agriculture declined.
The statistics bureau made no revisions to the second quarter, when GDP shrank 0.4% quarter-on-quarter and was up 0.3% year-on-year.
So-called “acquired growth” at the end of the third quarter stood at 0.7%, meaning that if there is no quarterly growth between October and December, over the whole year GDP will be up 0.7% compared with 2022.
