Eurozone retail sales continued to fall sharply in January, dropping for the eighth month running. At 44.0, compared to 41.4 in December, the latest Bloomberg Eurozone Retail Purchasing Managers' Index (PMI) signals a further easing in the month-on-month rate of sales decline from the all-time record pace seen last November.

The Retail PMI is based on a mid-month survey of more than 1,000 executives in the euro area retail sector and provides data one month ahead of government-issued figures. The latest findings also indicate a marked easing in the rate of decline of year-on-year sales, which registered the smallest fall of the current eight-month sequence.

Weaker falls in retail business were often the result of sales being stimulated through increasingly heavy discounting, as retailers cut prices in the face of weak demand and government incentives boosted car purchases.

• The month-on-month sales index for Italy rose sharply from 31.9 to 38.6, signaling the smallest drop in sales for four months as consumers took advantage of sales promotions. Italy continued to record the steepest rate of decline of the three largest euro countries, continuing the trend seen throughout last year. Sales have now fallen for twenty-three continuous months.

• Sales rose marginally in France for the first time since September. The month-on-month index picked up from 47.3 to 50.5. Retailers reported some signs of improved consumer spending, although this was often linked to price discounts as well as sales of cars being aided by government incentives.

• Sales fell at a slightly increased rate in Germany. The month-on-month index dipped from 42.3 to 41.7, a reading marginally above November's record low of 41.3. Sales in Germany have now fallen for eight successive months, with retailers often reporting that consumer confidence had remained subdued due to concerns regarding the wider economy.

Sales by sector - clothing & footwear and food & drink were up sharply on last year

Sales of clothing & footwear, food & drink and, to a lesser extent, pharmaceuticals, all rose on a year ago in January. Retailers reported that New Year sales had helped to boost trading volumes significantly in some cases. Sales of household goods and autos continued to fall, although in both cases the annual rate of decline eased compared to December. Despite government financial incentives for car purchases in France and Germany, autos retailers continued to report the steepest rate of decline of all sectors, although the rate of contraction slowed during the month.

Sales against plans - targets missed to smallest extent since last May

The sales against targets index rose sharply from 30.9 to 42.1 in January. This indicated that sales targets continued to be missed by a wide margin, but that shortfall was the smallest since last May. Targets were missed to the greatest extent in Italy, although the trend was far less marked than that seen during the final quarter of last year. French retailers reported the smallest shortfall of sales compared to targets, missing previously set plans by the lowest margin for eight months. By product sector, only autos & fuel and household goods retailers reported that targets had not been met in January. Clothing & footwear retailers saw the greatest gain.

Expected sales next month - retailers less pessimistic than in December

Retailers remained pessimistic about future sales, though less so than in December. The expectations index recovered from December's all-time low of 34.1, to 44.7. It remained below the 50.0 neutral level to indicate that, on average, survey respondents expect to miss sales targets in February. Pessimism moderated from record lows in all three countries.

Expectations for beating targets in the coming month improved in all sectors with the exception of clothing & footwear, where expectations hit a five-year low as respondents expect a reversal of the surprisingly buoyant sales seen in January.

Prices and margins - wholesale price pressures picked up and retail margins fell steeply

Having eased to a three-year low in December, the rate of inflation of prices paid for goods by retailers picked up to a three-month high in January. The price index rose from 54.6 to 59.1, reflecting higher rates of price inflation in all three main euro countries. Wholesale price inflation accelerated in four product sectors, led by pharmaceuticals. Clothing & footwear was the exception, where prices fell slightly since December.

Gross margins at Euro-Zone retailers deteriorated in January at a rate exceeded only by the survey-record decline seen in December, caused by widespread price discounting, rising input costs and weak demand. The margins index edged up from 36.6 to 37.8. Margins deteriorated sharply in all three countries, led by Italy.

Employment - jobs lost at steep rate, though only marginal cut seen in Germany

Euro area retailers cut staffing levels for the tenth month in a row in January, with the rate of job losses little-changed from December's four-year record. The employment index registered 47.5, from 47.4 in December. All three of the largest euro countries saw a drop in employment, with an acceleration in the rate of job shedding in France offset by reduced rates of decline in Italy and Germany - the latter showing a very marginal cut in employment as a result. Italy still saw the largest overall cut in retail employment.

Retailers' buying and stock trends - record falls in buying and stock levels

Retailers' stocks of unsold goods registered the largest decline in the survey's five-year history in January, reflecting deliberate efforts - notably discounting - to wind down stocks in the face of weak demand. Stocks have now fallen for five successive months. The stocks index fell from 48.9 to 48.3, led lower by a steep drop in retail stock holdings in Germany. Marginal declines were seen in France and Italy, the latter recording the first fall since April 2007.

The amount of goods purchased for resale by euro area retailers also posted a record decline in January, dropping for the sixth successive month. The buying index fell from 44.4 in December to 43.7. Italian retailers reported the largest reduction in purchasing, followed by a record decline in Germany. A slight cut in purchases was seen in France.