Italy got bad news on Wednesday as its economy contracted in Q3, with GDP falling 0.2%, as opposed to a 0.3% expansion in Q2. The news could signal a beginning of Italy’s fifth recession since 2001, just as new austerity measures are being put in place that will further threaten economic growth.
According to a Bloomberg report, the national statistics institute Istat said in Rome that this is the first contraction in the country’s economy since the last quarter of 2009. Consumer spending lost 0.2% from Q2, and investment fell back by a larger margin of 0.6%. Exports increased by 1.6% during the quarter, as imports lost ground, dropping 1.1%.
Chiara Corsa, a Milan-based economist at UniCredit, commented in the report, “Italy technically entered a recession as we expect an even more marked contraction in the fourth quarter of minus 0.6%. Looking at today’s data, they show that the main drag came from domestic demand, both consumptions and investments.”
That does indeed seem likely as a new 30 billion euro ($39 billion) emergency budget plan, to be voted on as soon as Thursday, is Italy’s third austerity package for the year; tax increases and spending cuts already in place probably contributed substantially to the Q3 contraction.