ROME (Reuters) -Italy narrowly avoided recession in the third quarter, data showed on Thursday, with gross domestic product stagnating following a marginal contraction in the second quarter.

On a year-on-year basis, the euro zone's third-largest economy grew by a weak 0.4% between July and September, national statistics bureau ISTAT said in its preliminary estimate.

A Reuters survey of 27 economists had forecast a 0.1% rise quarter-on-quarter and a 0.6% increase year-on-year.

Italy avoided by a whisker a so-called technical recession, defined by economists as two consecutive quarters of falling GDP, after a 0.1% quarter-on-quarter contraction in the April to June period, confirmed by ISTAT.

The flat quarterly GDP reading between July and September was the result of shrinking domestic demand and a positive contribution from trade flows, ISTAT said.

It gave no numerical breakdown of components with its preliminary estimate, but said agriculture had expanded, services had stagnated and industry had declined.

The statistics bureau revised the year-on-year reading for the second quarter to 0.5% from an originally reported 0.4%.

It said so-called "acquired growth" at the end of the third quarter stands at 0.5%.

This means that if there were to be zero quarter-on-quarter growth in the final three months, over the whole of 2025 GDP would increase by 0.5% from the previous year, in line with the government's latest target.

Rome earlier this month marginally lowered its forecast from an April projection of 0.6%.

(Reporting by Antonella Cinelli, graphic by Stefano Bernabei, editing by Gavin Jones)