Customers sit in a bar near Duomo cathedral in Milan, Italy. (Photographer: Alessia Pierdomenico/Bloomberg)

Italy Exits Its Slump as Output Grows More Than Forecast

(Bloomberg) -- Italy emerged from a recession in the first quarter as output rose more than economists had forecast, in a much-needed boost to the populist government in Rome.

Output expanded 0.2 percent from the previous quarter, a report by statistics agency Istat showed on Tuesday. That’s above the median estimate of 0.1 percent in a Bloomberg survey of 30 analysts.

The quarterly growth “is the result of an increase of added value in agriculture, in the industrial sector, and in services,” Istat said. In the three-month period there was also a positive contribution from exports, the statistics bureau said.

Italy Exits Its Slump as Output Grows More Than Forecast

Italy was the only euro nation to fall into a recession at the end of last year as faltering global trade and souring business confidence caused two straight quarterly contractions of its gross domestic product. Industrial production rose both in January and February, prompting hopes of a return to economic expansion.

Italian bonds erased declines as demand rose at a 5-year debt sale and after the nation’s gross-domestic-product beat median estimates. The 10-year spread between BTPs and equivalent German bunds narrowed 4 basis points to 254 basis points as of 1:07 p.m. Rome time.

ITALY REACT: GDP Surprise May Not Be as Good as It First Seems

Deputy Premiers Luigi Di Maio from the Five Star Movement and Matteo Salvini from the League said the GDP report showed that their economic policies supporting domestic demand are bearing fruit, with Salvini urging what he called a “necessary tax reduction.”

Earlier this month, Prime Minister Giuseppe Conte’s government cut its target for output growth in 2019 to 0.2 percent from 1 percent previously.

On Friday, S&P Global Ratings said the Italian economy will likely “stagnate this year.” On the same day, the nation’s main business lobby Confindustria said it expects the economic situation to remain fragile and uncertain during the second quarter.

The euro-zone economy expanded 0.4 percent quarter on quarter, compared with an estimate of a 0.3 percent expansion, Eurostat in Luxembourg reported earlier.

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