Panasonic's Lumix DMC-FP3 has a slim and stylish anodised aluminium body that's not too dissimilar from the Lumix DMC-FP8's . Like the FP8, it's available in a range of finishes (black, silver, blue, red and purple) - we've tested the black one here.

Like its older brother, it's a well specified camera with a 14.1 megapixel 1/2.33in image stabilised sensor supporting sensitivities up to ISO 1600 (and ISO 6400 in High Sensitivity mode) as well as being able to record 720p video at 30fps in the Motion JPEG format. It's not a particularly efficient video format, consuming around 200MB of space on your SD card every minute, but quality was good and it responded well to dynamic range.

The Lumix DC Vario 6.3-25.2mm f/3.5-5.9 lens has a 4x optical zoom with an equivalent 35mm focal range of 35-140mm. The lens isn't as good as the Leica DC Vario-Elmar lens on the Lumix DMC-FP8, with barrel distortion still rearing its head at an effective 50mm focal length. The lens is quite soft around the edges and suffers from chromatic aberration across most of the focal range. Flare can also be an issue in extreme circumstances with a bright light source just outside of the frame.

Battery life isn't bad at 300 shots before you'll need to plug in at the wall. Start up time from opening the lens cover to recording your first shot takes around 1.7 seconds, which is a little slower than other compacts but it's definitely not a slouch. Time between shots is also respectable at 2.2 seconds. The 1.5 fps burst rate held up fairly well, lasting for ten frames at full resolution, before slowing to one frame every couple of seconds or so.

The screen is one of the main talking points and is very large for a camera of this size. It's still viewable under very bright sunlight and viewing angles are pretty good too. Panasonic has managed to cram such a large screen into the FP3 by doing away with all but a basic selection of controls on the back of the camera.

In theory, the idea behind this is great and there's potential to build much more functionality into a camera as sleek and stylish as this via the touchscreen interface. It should also help novices or casual camera users focus on taking pictures instead of navigating their way through a maze of buttons.

Unfortunately, the reality is quite different. Support for multi-touch is notably missing and you're greeted with a clunky and unresponsive interface that's anything but easy to use. Navigating through menus becomes an exercise in frustration and, because Panasonic has moved most of the controls to the touchscreen, you can 't just resort to using the buttons. The Quick Menu helps a little, although it's both slow and lacks that all important positive feedback when you press a button.

Another of the FP3's weaknesses is its sensor. It loses detail in highlights far too quickly in high contrast scenes and low-light performance was very poor. At ISO 400, image quality begins to disintegrate, as banding becomes apparent and smooth tonal graduations disappear. Colour reproduction starts to falter while detail evaporates and, by ISO 1600, there are horrible blotches across the entire frame. We wouldn't even dream of using even higher sensitivities because any sense of image quality is long gone.

In many respects, the Panasonic Lumix DMC-FP3 is like every other compact camera you're likely to see this year and it's shaping up to be a disappointing year in that respect. The FP3 is expensive for what it is and you could buy Fujifilm's excellent FinePix F70EXR for the same money if 720p video isn't important and, if it is, Panasonic's own Lumix DMC-FP8 is £40 cheaper.

Both of these cameras have fewer pixels packed into their tiny sensors and image quality is undoubtedly better than anything the FP3 can manage. Packing over 14 million pixels into such a small sensor is an incredible feat, but it's not one we applaud because image quality has taken a disastrous step backwards.