Europe from the European Space Agency's Envisat satellite.

The Bloomberg Eurozone Retail Purchasing Managers' Index (PMI), based on a mid-month survey of more than 1,000 executives in the Eurozone retail sector and issued one month ahead of government-issued figures, indicated a further modest month-on-month fall in like-for-like sales in August. Broad stabilisation of sales in Germany contrasted with continued steep falls in Italy. Separately, the European Central Bank (ECB) said on Thursday, that credit demand fell in July.

The headline index registered 47.1, down from 47.3 in July and below the no-change mark of 50.0 for the fifteenth successive month, reflecting a challenging retail climate and subdued levels of consumer spending. The broadly sideways movement in the euro‐zone index masked differing trends in sales across the three largest Eurozone countries, with the disparity between the best and worst performing national indexes rising to the largest in six months:

• Germany saw only a marginal month-on-month decline in sales as the index held on to the gain made in July. August's series registered 49.5 from 49.8 in July, meaning Germany posted the smallest decline in like-for-like sales of the big three Eurozone nations.

• France saw a moderation in the pace of decline of like-for-like sales following July's rapid fall. The index measuring month-on-month sales remained down on the long-run series average (51.0). The index registered 47.3 in August, up from 46.0 in July.

• Italy recorded the steepest month-on-month decline in sales of the three nations covered, with the pace accelerating for the second month running to the steepest since March. The index dropped to 44.0 in August from 45.6 in July, with many retailers linking depressed sales to pressure on households’disposable income.

In addition to recording the continued decline in like-for-like sales on a month-on-month basis, August's Retail PMI survey also registered a further steep drop in sales from a year earlier. The year-on-year sales index recovered a little from 39.8 in July but, at 41.7, remains below the no-change mark of 50.0 and also down on the long-run series average of 47.1. Rates of decline in year-on-year sales moderated across all three countries.

Germany again saw the weakest pace of contraction, with the decline the slowest in four months. Italy recorded the steepest rate of decline, despite the pace of contraction moderating to the weakest since January.

Sales by sector - - all product areas except pharmaceuticals post declines

The weakness in sales in August was broad‐based across four of the five product areas monitored, with only retailers of pharmaceuticals reporting an improvement from a year earlier. Clothing & footwear retailers again posted the sharpest decline in sales (and the steepest fall in sales in that sector since March), with their poor performance in August widely attributed to reduced consumer footfall. Retailers of household goods also saw a steep and accelerated decline in year-on-year sales. Although falling for the thirty-fourth consecutive month in August, the latest year-on-year drop in sales for the autos sector was the weakest since November 2006 - - reflecting the relative success of the car scrappage incentive schemes.

Sales against plans - - sales continue to fall short of original targets across all countries

At a level of 36.3 from 35.8 in July, the sales-against-targets index signaled a further undershoot of actual sales to original plans in August. Each of the big three Eurozone countries reported that their August sales had disappointed in relation to original targets, with the shortfall in sales the greatest in Italy (where it accelerated to the largest in five months) and smallest in Germany, where targets were missed to the smallest extent in four months. By product sector, targets were missed to the greatest extent by retailers of clothing & footwear and to the least marked extent by retailers of pharmaceuticals.

Expected sales next month - - sentiment for next month's sales broadly neutral

Having dropped to a six-month low in July, the index measuring expected sales recovered to a three-month high of 50.5 in August - - a level indicative of broadly neutral sentiment for next month's sales. The improvement in the headline Eurozone series was driven primarily by a bounce-back to positive territory in French retailers' expectations for sales. German retailers reported a moderation in their degree of negative sentiment to the weakest in five months. Italian retailers were again the most pessimistic, despite an easing in the degree of negative sentiment.

Prices and margins - - inflation remains historically weak; margins continue to slide

Inflation of prices paid by Eurozone retailers for their goods for resale remained historically weak in August, amid strong competition amongst suppliers. Despite rising for the second month running (to 50.9 from 50.7 in July), the prices paid index again stayed close to the 50.0 no‐change mark and to June's series low. Prices paid by French and Italian retailers were reported to have risen, while prices paid by German retailers fell for the first time in the five‐and‐a‐half year series history. By product sector, prices paid for goods for resale rose at the sharpest rate for household goods, while retailers of food & drink reported the steepest decline - - which was linked in many cases to lower prices for dairy products. Despite weak inflation of prices paid, margins continued to fall at a steep rate (41.2).

Employment  - -further month of job shedding with all three nations posting declines

The Eurozone retail sector workforce continued to contract in August as weak sales and pressure on margins encouraged retailers to streamline their staffing levels. At 47.4 in August, the employment index was unchanged on July’s reading and reflected job losses across Germany (49.8), France (46.8) and Italy (45.3).

Retail stocks - -stock run downs continued

Retailers continued to run down their inventories in August, in response to the weak sales environment and as part of efforts to reduce costs. The index measuring inventories of goods for resale registered 44.4, up on July's series low but down on the long-run average (51.2). Inventories declined across all three countries. Purchasing of goods for resale also continued to decline in August (45.3).

ECB says credit demand fell in July

The ECB said on Thursday that annual rate of growth of M3 -  - a broad measure of credit and money in the Eurozone economy - - decreased to 3.0% in July 2009, from 3.6% in June 2009. The three-month average of the annual growth rates of M3 over the period May 2009 - July 2009 decreased to 3.4%, from 4.1% in the period April 2009 - June 2009.

Rather than borrowing, businesses overall, repaid €26bn in July - - only slightly less than the amount they paid back in June. Loans to households showed no growth over the past year.

ECB figures showed annual growth in loans to the private sector slumped to just 0.6% last month compared with a record low of 1.5% in June

Jun 24, 2009: ECB launches "stimulus by stealth"; Announces massive lending of €442 billion - - $621 billion - - for 12 months to Eurozone banks