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News : EU Economy Last Updated: Feb 26, 2010 - 7:01:03 AM


Eurozone retail sales fell at sharpest rate in February since March 2009
By Finfacts Team
Feb 25, 2010 - 8:51:44 AM

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Eurozone retail sales survey data for February signalled another tough trading month with the seasonally adjusted Eurozone Retail PMI (Purchasing Managers' Index) falling further to 44.2, the lowest reading since March 2009 and indicative of the sharpest monthly dip in sales in the interval. The PMI was also below its long-run trend level of 48.9 in February. Any figure greater than 50.0 represents monthly growth of sales.

The Eurozone Retail PMI survey covers retailers in the three largest Eurozone economies. A broad-based fall in monthly sales was registered in February, as Italy posted the first decline since last October. Italian retailers linked a reversal of their fortunes to weak consumer spending and the end of government car scrappage incentives. Meanwhile, French and German retailers continued to be undermined by fragile consumer demand and poor weather conditions, with the latter posting the steepest rate of contraction in sales among the ‘big three’ countries. Germany posted the fastest drop in monthly sales since January 2009.

On an annual basis, retail sales across the euro area fell at the fastest rate since July 2009. Anecdotal evidence also indicated that consumer confidence in general remained low. All three countries posted marked year-on-year declines in retail sales in February.
The marked annual sales contraction across the Eurozone partly reflected the fact that car scrappage schemes had now ended in all three countries (with the last scheme in Italy closing in January). Autos & fuel posted the sharpest annual drop in sales of all sectors covered, and the steepest rate since January 2009. At the other extreme, pharmaceuticals recorded annual growth of sales for the seventh month running.

Eurozone retailers’ sales missed targets to the greatest extent in fourteen months in February. French retailers missed targets to the greatest extent, but were also most optimistic regarding the March outlook.

Compounding retailers’ woes in February was a sharper increase in wholesale prices. Average list prices rose at the fastest rate since February 2009, but inflation remained weaker than the long-run survey trend. By sector, prices rose at the strongest rate in the pharmaceuticals and household goods sectors.

Growing inflationary pressure on retailers’ costs and sub-par sales performance combined to produce the steepest deterioration in gross margins since January 2009. By country, Italy and Germany posted the fastest declines in profitability during February.

The weakness of business conditions in the Eurozone retail sector was underlined in February by a further round of job shedding. The current sequence of headcount reduction now stretches to almost two years, with all three countries registering declines. The steepest drop was recorded in Italy, while German retailers continued to cut workforces only marginally.

Purchasing activity by Eurozone retailers declined for the nineteenth month in succession in February. The rate of contraction was the fastest since last August. A modest rise in French retailers’ purchases was offset by marked falls in Italy and Germany. The latest contraction in purchases led to an overall fall in the value of goods held in stock in the sector, continuing the trend seen since September 2008. Again, declines in Italy and Germany offset a rise in French retail inventories.

Commenting on the retail PMI data, Trevor Balchin, senior economist at Markit, said: “The poor weather continued to negatively impact on business conditions in the Eurozone retail sector in February, although this should not deflect attention from the underlying weakness of consumer demand. Sales fell at sharper rates on both the monthly and annual measures, and retailers continued to cut jobs and purchases of new stock. As we saw for France in January, there was a noticeable effect on the Italian data from the end of their car scrappage scheme, resulting in the strongest annual fall in autos & fuel sales across the euro area as a whole since January 2009. Retailers’ woes were further compounded by evidence of rising costs, although list price inflation remains muted compared to the survey’s historic trend.”

For the Retail PMI, 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.

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