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Italy Contracts in Third Quarter as Recession Enters Third Year

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Nov. 14 (Bloomberg) -- Italy’s recession, the country’s longest since World War II, entered its third year after gross domestic product fell in the three months through September.

GDP declined 0.1 percent from the second quarter, when it dropped 0.3 percent, national statistics institute Istat said in a preliminary report in Rome today. That matched the median forecast of 21 economists in a Bloomberg News survey. From a year earlier, the economy shrank 1.9 percent.

The slump, combined with a third-quarter contraction in France, indicates the euro-area economy is continuing to struggle to recover from the debt crisis. Istat’s acting chairman, Antonio Golini, told lawmakers on Oct. 29 that Italy’s GDP will decline 1.8 percent this year. That’s more than the 1.4 percent contraction the statistics office projected in May.

“Acceleration in activity is not in the cards anytime soon,” said Annalisa Piazza, an analyst at Newedge Group in London. “Business confidence indicators have been relatively upbeat in the third quarter, but hard data remained in contraction territory.”

Germany’s economy, the euro area’s biggest, lost momentum in the third quarter, with growth cooling to 0.3 percent from 0.7 percent. France, the region’s second-biggest economy, unexpectedly contracted 0.1 percent.

Unemployment

In Italy, joblessness rose more than forecast in September to a record 12.5 percent, with youth unemployment at 40.4 percent. While industrial production rose in September for the first time in three months, it fell 1 percent in the third quarter.

There are some signs of stabilization. Business confidence rose last month to the highest since August 2011 as executives expect Italy to exit its slump soon. That view is backed by Prime Minister Enrico Letta’s government, which since taking power in April has eased some of the budget austerity that Italy needed last year to fight the European sovereign debt crisis.

“Some macro data say that next year, 2014, the recovery is actually at hand,” Letta said in a Rome speech yesterday.

Finance Minister Fabrizio Saccomanni told lawmakers last month that Italy’s GDP will rise 1.1 percent next year. That’s more than the 0.7 percent expansion forecast both by Istat and the European Commission.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net