Italy is Europe's second largest manufacturer and is currently the only European Union member in recession, although growth in export powerhouse Germany also fell in 2018. The Italian economy suffered a harsh recession in 2012-13 and has enjoyed only slow growth since then. Overall growth for full-year 2018 was just 0.8 percent.
Italy's Prime Minister Giuseppe Conte had anticipated the bad news on Wednesday during a business conference in Milan. "Analysts tell us we'll likely still suffer a bit at the start of this year," he said, pointing the finger at a slowdown in China and Germany which are hurting Italian exports.
"But all the elements are there to recover in the second half," Conte added. The coalition government of the anti-establishment Five Star Movement (M5S) and the far-right League party was forced to water down its ambitious and costly budget in December to avoid being punished by the European Commission and the financial markets. A slowdown will make it even harder to follow through on expensive vote-winning measures both parties promised their bases, from reform of the pension system to income support for the poor.
Thursday's data "reflect a marked worsening of the industrial sector's performance, and of a negative contribution of agriculture," national statistics institute Istat said. The institute had earlier released December's unemployment rate, which fell to 10.3 percent from 10.5 percent, a positive sign. The jobless numbers rose 0.1 percent for young people aged 15 to 24, however, bringing the rate to 31.9 percent.