The Bloomberg Eurozone Retail Purchasing Managers’ Index (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 PMI rose in April to 48.4, from 44.1 in March, indicating the weakest rate of decline since the current sequence of contraction began last June. Although sales have now fallen for 11 consecutive months, the rate of decline has eased from the series record registered last November.

Retail sales again fell compared to one month earlier in each of the three largest euro economies. In all cases the rates of contraction slowed and the differentials between the three countries narrowed. Survey respondents reported that sales were aided by better weather and car scrapping incentives, and also noted some improvement in consumer sentiment compared to recent lows:

• Italy continued to register the steepest overall fall in retail sales. The month-on-month sales index rose from 41.9 in March to 46.8 to indicate the weakest rate of decline since October 2007.
• Retailers in Germany saw sales fall at the slowest pace in the current 11-month sequence of decline. Sales were down only modestly during April to represent a marked contrast to the steep rate of decline recorded at the start of the year. The month-on-month index for Germany picked up from 44.4 in March to 48.9.
• France registered only a marginal decline in sales that was the weakest among the three countries covered, as has been the case throughout much of the past year. The month-on-month index rose from 45.7 to 49.2, indicating the smallest decline for three months.

The April survey showed that euro area retail sales rose on an annual basis for the first time since May 2008. The year-on-year sales index surged above the 50.0 no-change level from 36.4 in March to 51.9. However, anecdotal evidence from panelists suggested that the marked improvement reflected both the later timing of Easter this year compared to 2008 and to milder weather.

Sales by sector – food & drink and clothing & footwear sales rise sharply

Three sectors posted annual growth of sales in April. Food & drink retailers reported the strongest rise, followed by clothing & footwear, with sales in both cases benefiting from good weather and the later timing of Easter. Sales of toiletries & cosmetics were up on last year, while household goods and autos & fuel continued to sell below 2008 levels. That said, auto sales fell at the weakest pace since May of last year as dealers reported a boost from government scrapping incentives.

Sales against plans – sales missed targets by the smallest amount for eleven months

The sales against targets index rose from 36.9 to 44.4, staying well below the 50.0 neutral level to indicate that sales objectives were again missed. The shortfall was the smallest since May of last year. Italian retailers recorded the greatest sales disappointment, while their German counterparts reported that targets were exceeded for the first time in two years. Previously set targets proved too optimistic in all five product sectors, with autos & fuel posting the worst performance. Clothing & footwear sales came closest to planned levels in April.

Expected sales next month – sales targets forecast to be beaten in May

Retailers expect to beat targets on average in May, although they were more cautious than in the previous survey period. The expected sales index fell from 55.8 to 52.4. Targets are expected to be beaten in France and Italy, but missed in Germany. Retailers of toiletries & cosmetics and food & drink were the most optimistic, while autos & fuel sellers were pessimistic.

Prices and margins – wholesale price inflation at joint-survey low

Prices paid for goods by retailers showed the smallest monthly rise since that indicated when survey data were first collected in January 2004. The prices index dropped from 53.0 to 52.2 in April. The rate of increase has trended lower over the course of the past year, linked to both lower commodity prices and intensifying competition among suppliers amid weak demand. Trends varied by country in April, with the rate of inflation falling in France but picking up in Germany. Wholesale prices rose in Italy having fallen the previous month.

The weak rate of wholesale price inflation took some pressure off retail margins, which showed the smallest monthly deterioration since last May. The margins index rose from 40.5 to 42.8, indicating an easing in the rate of decline for the fourth successive month from December’s record. Of the three countries covered, Italian retailers again saw the sharpest deterioration in margins while German firms reported the weakest decline.

Employment – rate of job shedding slows

Euro area retailers reduced employment levels on average for the thirteenth consecutive month in April. However, the employment index rose from March’s five-year low of 46.7 to 47.9, registering an easing in the rate of job losses to the slowest since last November. Employment fell in all three countries covered by the survey, led by Italy, but in all cases the rates of decline moderated.

Retailers’ stock trends – rate of decline of inventories slows

Retailers continued to reduce their purchases of goods for resale in order to keep stocks low in the face of weak demand, although the buying index rose for the second month running to 46.6 to register the smallest drop since last October. As a result, the rate of decline of retailers’ stocks of unsold goods slowed compared to March’s record (but remained strong by historical standards of the survey). The stocks index registered 46.6, up from 45.8 in March. Inventory trends varied by country, with slower rates of depletion in Germany and France offset by a record fall in Italy.