Italy slides into deep recession; GDP contracts 0.7% in Q2

Italy, eurozone's third-largest economy, has registered a 0.7-per cent contraction in the April-June quarter over the first quarter, its fourth consecutive quarterly contraction, indicating a deeper than anticipated economic downturn and dampening the revival hopes for the recession-hit economy to emerge from the debt crisis in the near term.

According to data released by official statistical agency Istat yesterday, the nation's economy shrank 2.5 per cent compared to a year ago.

Italy's gross domestic product (GDP) shrank 0.8 per cent in the first quarter, following a 0.7-per cent contraction in the fourth quarter of 2011 and 0.2 per cent in the previous quarter.

Analysts believe that weak domestic consumption and poor consumer sentiment coupled with weak bank lending are weighing down on economic growth.

Industrial output figures, released by Istat also depict a gloomy picture of the economy. The output was down 1.4 per cent in June from May, and 8.2 per cent lower compared to a year ago.

The country's government lead by prime minister Mario Monti has been resorting to stringent austerity measures to bring down the government's borrowing costs, as fears over spreading of the eurozone sovereign debt crisis are growing.