Italy slips into recession as Eurozone growth disappoints

Italy slipped into a recession at the end of last year after its economy contracted for a second consecutive quarter.

The Italian economy shrank 0.2 per cent in the final three months of 2018, the country’s statistical office Istat said today, following a 0.1 per cent drop the previous quarter.

Read more: Eurozone at risk of renewed crisis – and it's all about Italy

Prime Minister Giuseppe Conte said he expected a further contraction but hoped for a recovery in the second half of the year.

Over the two quarters Rome was embroiled in an intense standoff with the EU over its budget plan for 2019.

The agriculture, forestry and fishing sectors drove the downturn, Istat said, along with industry and services.

Fidelity International analyst Andrea Iannelli said the Brussels row “exacerbated” Italy’s weaknesses and the latest figures highlighted the challenges that still lay ahead.

Economic growth in the Eurozone remained flat at 0.2 per cent over the quarter, its lowest in four years, eurostat also said today.

“Hopes of a swift bounce back after the poor third quarter had already faded towards the end of the year, but the 0.2 per cent growth in GDP remains disappointing nevertheless,” ING senior economist Bert Colijn said.

Despite a series of weak economic data in recent month, Eurozone unemployment remained at 7.9 per cent, its lowest level since October 2008.

Read more: Eurozone inflation falls to eight-month low 

Unemployment fell slightly in Italy and Spain to 10.3 per cent and 14.3 per cent but the pair maintained the highest jobless rates in the bloc.

“Despite a strong labour market, the Eurozone will have to navigate Brexit, as well as the expected fall in global economic trade if it hopes to hold on to its record low unemployment rate going forward,” Cebr economist Marina Mensah-Afoakwah said.