· Italy’s retail sales rose by 0.3% in nominal terms in February. Nominal growth in retail sales shows some pick up as the overall three month growth rate has improved. But this is an inflation effect. When we deflate nominal retail sales buy Italy’s CPI we find three month growth is still declining… albeit at a slower pace than in come previous periods. Still, the current quarter (2008-Q1), with two months worth of data in hand, shows real retail sales posting a decline at a 2.8% annual rate. This compares to an actual Q4 rise in real retail sales of +3.8%. in 2007 Q4. As you can see from the plotting of real retail sales, Italy’s consumers have been challenged for quite some time. While there is a minor abatement of the ongoing sales deceleration in place, that seems to be in the context of a broader and still declining overall trend. So we should take no consolation from the current nominal retail sales pick up or even from the ‘upward hook’ formation on the growth chart for real retail sales as of February. It has no fundamental basis.