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Italy Output Unexpectedly Fell in March

May 9 (Bloomberg) -- Italian industrial production unexpectedly fell for a second month in March, signaling that the nation’s economy is struggling to sustain an exit from its longest recession on record.

Production decreased 0.5 percent from February, when it declined a revised 0.4 percent, national statistics office Istat said in Rome today. Economists had forecast a 0.3 percent increase, according to the median of 17 estimates in a Bloomberg News survey. Output fell 0.4 percent from a year earlier when adjusted for working days.

The euro region’s third-largest economy will expand in 2014 less than the government estimates as the recovery will be mainly driven by external demand, the European Commission said this week. Gross domestic product will increase 0.6 percent this year, the Brussels-based commission said in a May 5 report. That matches a forecast released by Istat on the same day and compares with Italian Prime Minister Matteo Renzi’s expectations of a 0.8 percent expansion.

The “reading for industrial production came in well below expectation and shows a weak exit from the slump,” said Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London. The decrease “is largely due to a sharp drop in energy production, as well as a disappointing performance of consumer durables production.”

Overall electricity production at Enel SpA, Italy’s main utility, fell 3 percent in the first quarter from the same period a year ago, the Rome-based company said yesterday.

Return to Growth

The country’s longest economic contraction since World War II ended in the fourth quarter when GDP increased 0.1 percent. That prompted Renzi’s government to pass a payroll-tax cut for lower income workers in order to stimulate domestic demand and sustain the recovery.

Renzi’s efforts may fail as the euro appreciation limits the rise of Italy’s exports and the nation’s unemployment will rise to 12.8 percent in 2014, the EU said this week.

“There is a risk that unemployment at its current level remains such, not only in the long term, but even becomes structural,” Finance Minister Pier Carlo Padoan said last night at an event in Rome.

Italy’s economy expanded 0.2 percent in the first quarter, Istat acting Chairman Antonio Golini told lawmakers in Rome last month. The statistics office will release its official GDP data for the three months through March on May 15.

Istat originally reported a 0.5 percent contraction of industrial output in February.

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

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Kevin Costelloe, Jerrold Colten

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