ROME, May 12 (Reuters) - Italy's economy grew significantly more than expected in the first quarter, with gross domestic product up 0.5 percent from the previous three months, the strongest gain since the fourth quarter of 2006.
On an annual basis, GDP was up 0.6 percent after a 2.8 percent drop at the end of 2009, the first year-on-year rise since the first quarter of 2008, data showed on Wednesday.
A Reuters survey of 24 analysts had pointed to a quarterly increase of 0.3 percent and a flat year-on-year reading.
Official statistics agency ISTAT also revised up the fourth quarter of 2009 to show a marginal quarterly contraction of 0.1 percent compared with a previous estimate of -0.3 percent.
Analysts welcomed the stronger than expected figures but said they did not expect Italy to maintain the same momentum.
"Italian GDP figures ... are very volatile and after the fall in Q4, I was expected an upward bounce," said Gilles Moec of Deutsche Bank.
"We may see a bit of a backlash in the second quarter. The strong rise in Q1 seems to have involved a bit of inventory rebuilding."
Moec forecast growth would slow to 0.4 percent in Q2, 0.3 percent in Q3 and 0.2 percent in Q4, for an overall increase in 2010 of 0.9 percent, broadly in line with the government's 1.0 percent target.
Davide Stroppa of Citigroup was far less upbeat, saying he expected growth of just 0.5 percent over the full year.
Italy's data follows GDP releases on Wednesday in the other large euro zone countries.
Germany posted a 0.2 percent quarterly rise, beating a median forecast of a flat reading, while France rose 0.1 percent, against a forecast of +0.3 percent.