Italy's economy grows stronger than expected 0.5% in Q3, easing pressure on new govt

A woman shops at Campo de' Fiori market in Rome, Italy, June 15, 2022. REUTERS/Guglielmo Mangiapane

* Q3 GDP 0.5% q/q, 2.6% y/y

* Easily beats forecasts

* Q3 growth founded on domestic demand

ROME, Oct 31 (Reuters) - Italy's economy grew by 0.5% in the third quarter from the previous three months, preliminary data showed on Monday, a much stronger reading than expected which takes some pressure off the new right-wing government.

On a year-on-year basis, gross domestic product in the euro zone's third largest economy was up 2.6%, national statistics bureau ISTAT said.

A Reuters survey of 22 analysts had forecast a flat quarterly reading and a 2.0% rise compared with the year earlier.

Not only analysts were taken by surprise by the firm reading. The Treasury said last month that is expected to see a GDP contraction in the third quarter.

Italian GDP has exceeded expectations in each of the first three quarters of this year.

However, looking ahead, the outlook has been clouded by sky-high, energy-driven inflation, exacerbated by the war in Ukraine, which has sapped business and consumer confidence, crimped investments and hit families' spending power.

Rome is officially forecasting full-year growth of 3.3% this year, slowing sharply to just 0.6% in 2023. Following the unexpected growth in the third quarter, the 2022 forecast looks likely to be exceeded.

ISTAT said that assuming GDP was flat quarter-on-quarter in the fourth quarter, full-year growth would come in at 3.9% this year.

The Treasury estimated last month that the economy would contract until the second quarter of next year, underscoring the tough task facing new prime minister Giorgia Meloni, who took office on Oct. 15.

ISTAT said the third quarter saw an increase in domestic demand, while trade flows were a drag on growth.

It gave no numerical breakdown of components with its preliminary estimate, but said a contraction of industry and agriculture had been outweighed by expansion in the service sector.

ISTAT confirmed second quarter growth at 1.1% from the previous three months but revised the year-on-year rate to 4.9% from a previously reported 5.0%.

ISTAT gave the following details on Italian GDP in the last three quarters:

Q3 Q2 Q1

Q/Q (pct change) 0.5 1.1 0.1

Y/Y (pct change) 2.6 4.9r 6.4r

r=revised

((Gavin Jones, +39 06 8522 4232, fax +39 06 854 0568

rome.newsroom@news.reuters.com))

Our Standards: The Thomson Reuters Trust Principles.