ITALIAN CONSUMER CONFIDENCE BOTTOMS OUT.

A combination of economic weakness and political turmoil battered Italian consumer confidence during 2003, but the panorama is likely to improve a bit in the second quarter of 2004.

Economic activity should rebound and the rate of job creation rise a bit as 2004 progresses. The benefits of economic recovery will be felt by households in the industrialized northern part of the country, but less so in Southern Italy.

In the South, unemployment of near 20 percent and substantially lower real wages will limit demand for high-end goods and services. However, a rebound in industrial activity and consumer confidence in the North will contribute to growth in sales of high-end durables approaching 10 percent (year-on-year) by the end of 2004.

The strength of the euro will give goods from outside the eurozone a cost-competitive advantage through most of this year. Look for the overall value of imported consumer goods to rise in the range of 5 to 10 percent during 2004.

Even though new car sales in general declined over the past year, Fiat experienced a spur of growth as of the fourth quarter of 2003, and sustainable upward momentum in sales should emerge by the second quarter of this year. Internal demand for new vehicles should show sustainable recovery by midyear.

The political turmoil that cast clouds over Italys consumption climate during 2003 is likely to linger through much of this year. However, increasing voter dissatisfaction with the Berlusconi regime could lead to an early election late in 2004 or in 2005.

Demand for high-end services related to tourism bottomed out late in 2003, but should recover by midyear 2004. Farmhouse tourism suffered less than traditional tourism, and should continue to fare better all year. The number of farmhouse tourism units rose by 5 percent during 2003, and should rise at a similar pace this year. However, farmhouse tourism generates little demand for high-end tourism services associated with major hotels and resorts.

_{DEMOGRAPHIC CONTRACTION WILL LIMIT HOUSEHOLD DEMAND The population growth rate for Italy is below the regional average, due in part to a birth rate of 9 per thousand inhabitants, which is a bit below the average of 10 per thousand for Southern Europe. Nevertheless, job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve during 2004. Unemployment is running about 8.5 percent, and this continues to put downward pressure on consumer confidence.}

Italys population reached 57.2 million people during 2003, which amounted to almost 39 percent of Southern Europes 147 million inhabitants. According to data released by the PRB, Italys population will reach 57.6 million people in 2025, or less than 1 percent more than the level in 2003. Also, according to that source, Italy is going to have a population of 52.3 million people in 2050, or 9 percent less than in 2003.

The PRB revealed that a hefty 90 percent of Italys population lived in urban areas during 2003, and that the countrys population density is 491 people per square mile. By the year 2050, Italys population density should drop to 447 people per square mile.

Another source of demographic data, the CIAs World Factbook, indicates that 14 percent of Italys population was birth-14 years old in 2003, while 67 percent was 15-64 years old, and 19 percent of the populace was 65 years of age and over.

CIA statistics reveal that the countrys population growth rate is 0.11 percent and the net migration rate is 2.07 migrants per 1,000 people. According to the United Nations Population Division, in the year 2050, 12 percent of Italys population will be birth-14 years old, while 46 percent will be aged 15-59, and 42 percent of the populace will be 60 years of age and over.