Italy falls into recession as quarterly GDP drops

Italy has become the first major European economy to face a technical recession in five years.

The Italian economy shrank by 0.2% in the final quarter of 2018, according to official figures published this morning. It follows a 0.1% fall in the third quarter. Most economists define a recession as two successive quarters of contraction.

Although the depth of the recession is shallow, it will nonetheless be seen as important watershed for the European economy, which last faced a continent-wide slump during the late stages of the euro crisis in 2012 and 2013.

Italy's anti-establishment coalition government is currently locked in a battle with the European Commission over its budget, which aims to borrow more than the EC guidelines.

However, the country's economic growth has been dragged down by a generalised slowdown around the continent.

Europe's biggest economy, Germany, is expected to narrowly avoid recession, but contracted in the third quarter.

The weakness in late 2018 is partly being put down to a slump in world trade activity, amid fears that US tariffs on China are finally starting to bite.

According to the Italian statistical agency Istat, the decline was primarily due to a "decrease of value added in agriculture, forestry and fishing as well as in industry".