April 10 (Bloomberg) -- The Bank of Italy said the country’s economy contracted “significantly” in the first quarter, citing recent data, according to a quarterly bulletin released today.

Industrial production fell in February for an eighth month, statistics office Istat said yesterday. Business confidence fell to a record low in March. Citing consensus forecasts, the central bank said inflation in the countries that share the euro is slowing, but that there shouldn’t be a “generalized and long-term” fall in inflation.

“The recession is hurting public accounts” in Italy, the bulletin said. Bank lending is decreasing as fewer people seek loans and as banks grow more cautious. Italy’s five biggest banks cut lending to small businesses by 4.9 percent in February compared with a year earlier, the central bank said.

Italy has slipped into its worst recession in more than three decades. Fiat SpA, Italy’s biggest manufacturer, and Luxottica Group SpA, the world’s largest eyeglasses maker, have both cut output and jobs.

To contact the reporters on this story: Steve Scherer in Rome at sscherer@bloomberg.net.

Last Updated: April 10, 2009 09:30 EDT