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CONFIDENCE STRONG IN ITALY AND NETHERLANDS.

At a time when consumer confidence is at a low ebb in much of the eurozone, it is coming on strong in Italy and the Netherlands. This is reflected in a greater willingness among mid- to upper- income households to make high-end purchases.

During February consumer confidence in Italy rose 1.6 points, hitting a 12-year high of 126. This improvement was reflected in firm retail sales during the first quarter. Strong demand was noted for high tech goods including computers, mobile telephones, and stereo equipment. Increased retail sales in Italy are attributed to a modest increase in real wages at a time when inflation is running at the lowest level in recent history.

Concerns on the part of some Italians that the introduction of the euro would lead to an upsurge of inflation proved false. Smooth transition to the euro contributed to an increased sense of financial wellbeing that led consumers to put their currency to work through increased retail purchases.

Italy stood to benefit more than most other eurozone nations from the economic stability that membership brings with it. Long battered by economic and political crises, Italian households and industries are pressing ahead with major expenditures because they are confident that low inflation and modest finance costs will justify the risk.

The Netherlands, which was relatively unscathed by the 2001/2002 economic slowdown, is also experiencing firm consumer confidence. During the first quarter of 2002, economic growth projections for the year were upgraded. The nation's better-than-expected economic performance was linked to strong household consumption at the national level.

Increased household spending in Italy and the Netherlands is a harbinger of a generalized recovery in eurozone private sector spending. Given the relatively slow pace of the global economic recovery, increased demand will initially be driven by improved household consumption. A recovery in industrial consumption will follow one to two quarters later, during the first half 2003.
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Publication:Market Europe
Geographic Code:4EUIT
Date:May 1, 2002
Words:317
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