EU Economy
Eurozone retail sales PMI flat in June as falls in France and Italy offset German gains
By Finfacts Team
Jul 8, 2014 - 1:04 AM

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Retail sales in the Eurozone were unchanged on the month in June, the latest PMI (purchasing managers' index) data from Markit showed. There were marked differences in country-level trends, meanwhile, with a sharp and accelerated increase in sales in Germany contrasting with a renewed decline in France and a deeper downturn in Italy.

The Markit Eurozone Retail PMI - - which tracks month-on-month changes in like-for-like retail sales - - read 50.0 in June, little-changed from May’s 49.9 and indicative of a flat trend in sales. Compared to the situation one year earlier, trade was down moderately during June, according to firms.

Commenting on the data, Phil Smith, economist at Markit, which compiles the Eurozone Retail PMI survey, said: "The latest retail PMI data show a flat trend in Eurozone retail sales forming, a relative positive in the context of the recent prolonged downturn. The stagnation hides a growing divergence in country-level performance, however. The gap between Germany’s headline retail PMI and the average of those for France and Italy has increased throughout the second quarter to the widest for almost a year. Any hopes that consumer spending in France and Italy had turned the corner are looking a little premature."

Eurozone retail sales were supported by continued growth in Germany, where trade rose sharply on the month and to the greatest extent for almost three-and-a-half years. In stark contrast, France’s retail sector showed renewed weakness as sales there fell solidly, offsetting back-to-back marginal increases in the first two months of the quarter. Moreover, June’s decrease was the sharpest so far in 2014. A deepening downturn was meanwhile seen in Italy, where the rate of decline in sales accelerated for the second straight month to the fastest since February.

At the aggregate level, retailers’ purchasing activity followed the trend in sales and was unchanged in June after a fractional decrease mid-quarter. Stocks of items for resale meanwhile rose for the seventh straight month, and at the fastest rate since April 2011. This was largely due to sales being markedly lower than targets on average.

Despite the stagnation in sales in the Eurozone, retail employment rose for the first time in ten months. The rate of job creation was only marginal, however, with recruitment activity in Germany largely negated by continued staff shedding in both Italy and France.

June data meanwhile pointed to an uptick in the rate of wholesale price inflation facing retailers in the euro area, marking the first acceleration in cost inflation since the start of the year. Accordingly, data showed a firmer squeeze on gross margins, which deteriorated to the greatest extent since last November.

Finally, retailers’ outlook for sales* remained positive, although the degree of confidence weakened further from March’s recent high to a five-month low.

* Companies are asked whether they expect next month’s sales to be higher, lower or the same as plans.

For the Retail PMI, Markit has recruited a representative panel of retail companies in France, Germany and Italy. Together, these three countries account for approximately 62% of total Eurozone retail sales by value.

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