Italy’s economy shrinks 0.2% in the first quarter as recession risks rise

* Q1 GDP -0.2% q/q, 5.8% y/y, in line with forecasts

* First GDP contraction since Q4 2020

* Trade flows weigh on GDP in Q1

ROME, April 29 (Reuters) – Italy’s economy shrank 0.2% in the first quarter from the previous three months, preliminary data showed on Friday, as activity was hit by the coronavirus, high commodity prices firsts and the war in Ukraine.

On an annual basis, first-quarter gross domestic product in the eurozone’s third-largest economy rose 5.8%, the statistics office ISTAT said, reflecting the depressed level of GDP a year ago due to the COVID-19 pandemic.

The first-quarter result, which marked the first drop in GDP since the fourth quarter of 2020, exactly matched the median forecast from a Reuters survey of 22 analysts.

Looking ahead, the outlook has been clouded by events in Ukraine which have undermined business and consumer confidence and exacerbated already rising prices and supply shortages.

Prime Minister Mario Draghi’s government this month revised down its economic growth forecast for 2022 to 3.1%, from a projection of 4.7% made last September.

The latest forecast of 3.1% is considered optimistic by most independent bodies. Italian employers’ lobby Confindustria said the economy was heading into a recession, defined as two consecutive quarters of falling GDP.

After falling by a record 9.0% in 2020 and registering a partial rebound of 6.6% in 2021, this year’s Italian GDP should finally return to its pre-pandemic level, a result that may now be doubted.

ISTAT said the decline in the first quarter was due to negative trade flows, while domestic demand increased.

He gave no numeric component breakdown with his preliminary estimate, but said that manufacturing had stagnated and services had contracted. Agriculture, on the other hand, has shown some growth.

ISTAT revised the fourth quarter of last year to show a rise of 0.7% quarter-on-quarter, previously reported at 0.6%. Year-on-year was confirmed at 6.2%.

The story continues

ISTAT gave the following details on Italian GDP over the last three quarters:

Q1 2022 Q4 2021 Q3 2021

Q/Q (percent change) 0.2 0.7r 2.5

Y/Y (percentage change) 5.8 6.2 3.9

r=revised

((Gavin Jones, +39 06 8522 4232, fax +39 06 854 0568

[email protected]))