Retail sales in the Eurozone
rose at the fastest rate since May 2008 in the final month of 2010, according to
the latest survey data from Markit. Germany and France remained the key growth
The Eurozone Retail PMI (Purchasing Managers'
Index) - - which tracks monthly changes in the value of sales at retailers –
improved to 52.9, from 51.3 in November. The latest figure was also the
ninth-highest in seven years of data collection to date. Figures for Q4 as a
whole signposted the best overall growth in sales since Q4 2006.
Eurozone retail PMI data are
based on responses from the three largest euro economies. December data
signalled that France and Germany continued to outperform Italy. German and
French retail sales both rose solidly compared to November, while Italian sales
declined at a weaker rate.
German retail sales rose for the third month
running in December. The rate of growth eased slightly since November, but
remained sharp in the context of historic survey data. The respective index was
well above its long-run trend in seven years of data collection to date.
French retail sales increased for the second
consecutive month in December. Moreover, the rate of expansion accelerated to
its fastest since May 2008. Overall sales were partly boosted by strong demand
for autos while government incentives remained in place.
Italian sales fell in December, but at a
softer pace. The month-on-month rate of contraction was the second-weakest of
the current eleven-month sequence, and favourable compared to the long-run
Retail sales in the Eurozone rose on an
annual basis for the first time in four months in December. Moreover, the rate
of expansion was the fastest since May 2008. Germany and France both posted
sharp annual rates of growth in retail sales, which accelerated compared to
November, while Italy registered a further steep slide. At the detailed sector
level, food & drink posted the steepest year-on-year increase in sales.
On average, retail sales across the Eurozone
were only slightly below target in December. The degree to which actual sales
were lower than original plans was the weakest in the current sequence, which
stretches back to May 2007. German retail sales beat expectations for the first
time since July. That said, German retailers were less confident than their
French and Italian counterparts regarding the outlook for January sales.
Growth of retail sales in December was
supported by higher employment in the sector. Eurozone retail workforces have
expanded on average five times in the past six months. Mirroring the trend for
sales, German and French retailers took on more staff while falling headcounts
were recorded at their Italian counterparts. The overall rate of job creation in
the Eurozone retail sector was modest.
Strengthening demand in the Eurozone retail
sector led to a second successive monthly increase in the value of purchases by
retailers. It was the first back-to-back growth registered since March 2008, and
the rate of expansion in December was the strongest since April 2007. Meanwhile,
the value of goods held in stock at retailers rose for the eighth time in the
past nine months, and at the fastest rate since July 2008.
Downward pressure on retailers’ profitability
was maintained in December, despite faster growth of sales during the month.
However, the rate of deterioration in gross margins was the weakest since
Purchase prices paid by Eurozone retailers
for goods for resale rose at the fastest rate since January 2009 in the latest
survey period. The acceleration in inflation brought it broadly in line with the
long-run trend seen since the survey started in January 2004.
Commenting on the retail PMI data, Trevor
Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said:
"The Eurozone Retail PMI built upon
November’s upward movement, rounding off the best quarter in terms of monthly
sales growth since Q4 2006. The latest data suggest that consumer spending
growth will accelerate in the final quarter of 2010, with German consumers
leading the way and France appearing to have emerged from protest-related
disruption in the autumn.
"December data reinforced the national variations across the
currency bloc, with Germany and France continuing to outperform their southern
neighbour Italy. That said, the rate of decline retail sales eased sharply in
Italy, adding to hopes that the consumer sector will help lift economic growth
in the fourth quarter from the meagre 0.3% rise seen in the three months to
For the Retail PMI, Markit 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.