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Last Updated: Friday, 9 September 2005, 13:59 GMT 14:59 UK
Italy's economy shows growth sign
Italy's Prime Minister Silvio Berlusconi
Mr Berlusconi will hope the recovery continues ahead of elections
Italy's economy has shown signs of a recovery, with stronger consumer spending pulling it out of recession.

Gross domestic product (GDP) grew by 0.7% in the three months to the end of June from the previous quarter, statistical office Istat said.

The economy contracted in the previous two quarters and the government was under pressure to turn things around.

Analysts said that record oil prices were likely to hamper any further growth in the second half of the year.

"For now Italy is out of recession," said Silvia Pepino, an analyst at JP Morgan. "But there are risks from the recent oil price."

Ms Pepino said she did not expect Italy's economy to grow in 2005.

'Technical rebound'

Crude oil prices surged to a record $70.85 a barrel after Hurricane Katrina hammered the US and disrupted refining and drilling operations in the Gulf of Mexico.

The concern is that with petrol prices also surging, consumers will be left with less money to spend, reining in Italy's fragile recovery.

In the second quarter, consumer spending rose 0.6 percent from the previous three months, while exports also increased.

Vincenzo Guzzo, an economist at Morgan Stanley, said that the growth rate in the second quarter "will surely be unsustainable".

"It's due to a technical rebound," Mr Guzzo said. "We foresee a marked slowdown."


SEE ALSO:
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09 Sep 05 |  Business
Oil shock threatens world growth
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Italy bank chief 'will not quit'
05 Sep 05 |  Business
Italy plans corporation tax cuts
14 Jun 05 |  Business
Country profile: Italy
02 Aug 05 |  Country profiles


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