Italys economy contracts by 0.1% in Q4, raising recession fears

Italy's economy contracts by 0.1% in Q4, raising recession fears

* Q4 GDP -0.1% q/q vs forecast of -0.2%

* Domestic demand contracted in Q4, net exports grew

* Full year 2022 GDP rose prelim 3.9%

By Gavin Jones

ROME, Jan 31 (Reuters) – Italys economy shrank by 0.1% in the fourth quarter of last year from the previous three months, preliminary data showed on Tuesday, a slightly smaller contraction than expected but still raising fears of recession.

On a year-on-year basis, fourth quarter gross domestic product in the euro zones third largest economy was up 1.7%, national statistics bureau ISTAT said.

A Reuters survey of 23 analysts had forecast a 0.2% quarterly decline and a 1.6% rise compared with the year earlier.

Over the whole of last year, GDP growth, adjusted for the number of working days, came in at 3.9%.

Looking ahead, the outlook has been clouded by sky-high inflation and energy costs, exacerbated by the war in Ukraine, which have sapped business and consumer confidence, crimped investments and hit families spending power.

Rome is officially forecasting full-year growth of just 0.6% this year.

The Treasury estimated in November that the economy would contract in the fourth quarter of last year and also in the first quarter of 2023, dumping the country in recession – defined as two consecutive quarters of falling GDP.

ISTAT said the fourth quarter saw an decline in domestic demand, which negatively outweighed a positive contribution from trade flows.

It gave no numerical breakdown of components with its preliminary estimate, but said industry and agriculture had declined during the quarter, while services grew.

ISTAT confirmed a 0.5% quarter-on-quarter growth rate for the third quarter but revised up the Q3 annual expansion to 2.7% from a previously reported 2.6%.

ISTAT gave the following details on Italian GDP in the last three quarters of last year:

Q4 q3 q2

Q/Q (pct change) -0.1 0.5 1.1

Y/Y (pct change) 1.7 2.7 5.0