Alarm Grows Over Stagnant Italian Economy ISTAT announces 0.5% fall in GDP for early 2005. Manufacturing reports annual decline of 5.2%. Public sector wages next hurdle for government. ROME - Italy’s gross domestic product has fallen for the second quarter running. There was a 0.5% drop between January and March in comparison with the previous quarter, and the year-on-year trend has plummeted from +0.8% at the end of 2004 to -0.2%. Again according to data released yesterday by the ISTAT statistics institute, industrial output fell in March by 5.2% on an annual basis. For economists, it is a “technical recession”....