On Monday, Italy’s national statistics bureau ISTAT revealed the nation’s economy underperformed expectations for the second quarter of 2023.

The nation’s gross domestic product (GDP) fell by 0.3% compared to the previous quarter. Year over year, it was up 0.6%, which was judged by most analysts as an underperforming gain over a period of highly suppressed activity following the emergence from the pandemic period. A survey of analysts by Reuters had pointed to no change quarter to quarter, and an increase of 0.9% year on year.

The Italian government forecast a 1% growth for all of 2023, with a modest expansion to follow in the second half.

In a report for Capital Economics, Franziska Palmas wrote, “Italy is no longer outperforming its peers and we think it will experience a sharper drop in output than other euro-zone majors in the second half of 2023.”

While the statistics agency did not provide a number by number breakdown of its preliminary second quarter reading of GDP, it noted that although services grew marginally, industrial and agricultural output were down.

ISTAT added that if flat growth in the remaining quarters was to be assumed, then the quarterly decline of 0.3% would leave the third largest economy in the EU with carryover growth of 0.8% for 2023.

The report comes after the government’s statement earlier in the month which claimed that it was possible that GDP could grow by at least 1.2% through 2023, noting that the services sector at the time was enjoying a positive trend due to a highly successful tourism sector, and that this looked to be sufficient to counter any slowdowns in the industrial sector.

The agency also reported that annual inflation eased to 6.4% in July from 6.7% in June, looking at EU-harmonized consumer prices (HICP), as increases in prices of food, household, and personal care came in at 10.4%, which was overall similar to the month before, and more than 50% above the overall index.