November data covering the Eurozone retail sector signalled a month-on-month fall in sales, with Germany posting the steepest dip in five months. The Markit Eurozone Retail PMI (Purchasing Managers’ Index), based on a mid-month survey of more than 1,000 executives in the retail sector, fell from 50.0 in October to 48.9, showing a modest reduction in the total value of like-for-like store sales compared to one month ago.

The headline Eurozone data masked differing national trends. Of the three countries covered, Italy posted a monthly rise in sales for the first time since February 2007 and the fastest increase since January 2006. This was linked by panellists to signs of wider economic recovery. Meanwhile, Germany posted the steepest fall in five months and a sharper decline than that seen in France, underlining the weakness of the household sector in the largest euro economy. French retailers suffered the first fall in sales in three months, reporting disappointing footfall and a reluctance among customers to commit to big ticket purchases. However, the rate of decline was marginal.

Retail sales in the Eurozone were also lower on a year-on-year basis in November. The rate of decline sharpened slightly since October, but was weaker than in any other period of the current seven-month sequence. Faster annual declines were indicated in Germany and France, while the rate of contraction slowed sharply in Italy to a marginal pace.

By product sector, sales were lower than a year ago in November in all areas except pharmaceuticals, which registered growth for the fourth month running. The sharpest falls were indicated in clothing and footwear and food and drink.

Actual sales remained well below target levels in November. French and German retailers fared much worse than their Italian counterparts, who posted the smallest overall shortfall in actual sales against plans in over two years. Meanwhile, retailers are at their most confident regarding the one-month outlook since April 2008, pinning hopes for rising sales on the key festive trading period. This was despite persistent negative sentiment among German retailers.

The Eurozone retail sector continued to record a fall in staff numbers in November, extending the longest contractionary sequence in nearly six years of data collection to twenty months. That said, the rate of decline in the latest period remained modest, suggesting that the most severe phase of adjustment to reduced customer footfall had passed.

Retailers continued to cut back on purchasing activity in November, allowing for seasonal factors. However, the rate of decline was relatively modest compared to the average over the past sixteen months in which purchases have fallen.

Inflationary pressures in the retail sector remained subdued in November. Aside from being unchanged in June, over the past two months wholesale prices have risen more slowly than in any period since the series started in January 2004. German retailers registered a fourth successive fall in purchase prices. Despite weak inflationary pressure on costs, retailers across the Eurozone continued to suffer a sharp overall decline in gross margins, albeit at the slowest rate since May 2008.

Commenting on the retail PMI data, Trevor Balchin, economist at Markit, said: “November’s fall in the retail PMI to a level below the neutral threshold reflected ongoing weakness in the German household sector – chiming with the recent GDP numbers – and a reported reluctance among French consumers to loosen the purse strings following sales growth in September and October. In contrast, having been the worst performer during the previous four months, Italy registered a welcome rise in retail sales. While providing sound evidence that the worst has passed, the data underline the overall weakness of retail in the Eurozone, and add to the view that recovery will be slow.”

For the Retail PMI, the UK-based Markit Economics 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. The panel includes large chain retailers as well as smaller retailers to ensure balanced representation of the true structure of the Eurozone retail sector.