Italy's economy, the third-largest in the eurozone,
contracted by 0.7 per cent from April to June, compared with the
first quarter, official data showed Tuesday.
The figure was slightly better than analysts' predictions, which
were counting on a 0.8-per-cent quarterly fall. Nevertheless, they
indicated that Italy's recession, which started in the second half of
last year, was showing no signs of abating.
Output was down in all three main sectors of the economy -
agriculture, industry and services - national statistics office Istat
said in a preliminary estimate.
On a yearly basis, Italy's gross domestic product (GDP) sunk by
2.5 per cent in the second quarter of 2012, the worst result since
the last quarter of 2009, Istat said.
On current trends, the country's economy is set to shrink by 1.9
per cent this year, the statistics office added. In May, the European
Commission was expecting Italian GDP to contract only by 1.4 per
cent.
Markets were unfazed by the news, as by mid-morning trading the
Milan stock exchange was slightly up while risk differentials between
10-year Italian bonds and equivalent German ones fell below 450 basis
points.
However, Ben May of the London-based research outfit Capital
Economics argued in a briefing note that the data highlighted the
"huge economic and fiscal problems that Italy faces," and predicted
that the country would eventually be forced to seek a full bailout.
Prime Minister Mario Monti has resisted making an application for
any kind of external support - backing off even from a so-called
"bailout-lite" option that would see eurozone rescue funds and the
European Central Bank buy Italian bonds to reduce borrowing costs.
Adding to the gloom, Istat also said Tuesday that Italian
industrial production was down 1.4 per cent from May to June.
Analysts were expecting the monthly contraction to stand only at 1
per cent.
Compared to June 2011, the calendar-adjusted industrial output
index decreased by 8.2 per cent, the statistics office said. Taking
into account the first six months of the year, the yearly fall was 7
per cent.
