SPAIN'S CONSUMPTION PANORAMA BRIGHTENS.

(From Market - Europe)

Spain evaded the prolonged economic downturn that plagued most of the rest of the EU over the past two years, and commercial activity is positioned for moderate but sustainable growth throughout the remainder of 2004

The consumption climate brightened in recent months as consumer price inflation dropped from a high of 3.8 percent in the first quarter of 2003 to 2.6 percent in the fourth quarter. Interest rates are among the lowest in the eurozone and that has led to attractive terms of financing on high-end consumer goods

Regional disparity in purchasing power is greater in Spain than in most EU member nations. Power of consumption is highest in Baleares, the Basque Region, Catalania, Madrid, and Navarra. However, per capita income is relatively low in Andalucia, Castilla, Extremadura, and Galicia

The sociopolitical climate is favorable and government policies continue to put upward pressure on private sector consumption. It appears that the new administration will stick with responsible fiscal policies that will allow Spanish commercial activity to grow at a pace well above the EU average during 2004

Non-EU consumer goods have benefited from a cost competitive advantage resulting from the 27 percent appreciation of the euro against the US dollar from February 2002 through November of 2003. That advantage should persist through most of the first half of this year

Firm demand for residential real estate will persist into at least the second quarter of 2004, although the pace of year-on-year sales growth will drop off toward year's end. Growth in the construction sector is considerably above the overall industrial average but the gap should narrow this year as foreign orders for Spanish finished goods rise