CONFIDENCE IMPROVES AS ITALIAN RECESSION ENDS.

(From Market - Europe)

During the second half of 2003, Italy pulled out of recession and entered a pattern of slow and segmental recovery that should persist through 2004 and 2005. Throughout the first half of 2004, growth in household consumption should outpace that of industrial expenditure, but that pattern should reverse itself by the end of the year

The slow but sustained recovery in commercial activity in Italy will be reflected by GDP growth of approximately 1.5 percent in 2004 and 2 percent in 2005. That will bring about modest gains in purchasing power parity per capita throughout the period. Despite the recent strains on the economy, Italy remains one of the most affluent nations in Europe, with a GDP of $1.1 trillion and purchasing power parity per capita of $24,500. Consumer price inflation should remain below the 3 percent mark and that will contribute to a gradual increase in household wealth

Demographic factors will limit growth of household consumption through the first half of this century and should skew per capita purchasing power figures upward. According to data released by the Population Reference Bureau, Italy's fertility rate stands at 1.2 and the total population should drop from 57.2 million in 2003 to 52.3 million in 2050.

The majority of Italian households are moving out of the primary years of consumption and that will contribute to a pattern of slow growth in sales of household furnishings and decorations. Sales growth in those sectors should linger in the range of 1 to 3 percent through the first half of 2004, settling in the range of 2 to 4 percent by the end of the year.

Increasing health consciousness has begun to shape consumption decisions of the average Italian household. Sales of ...