Retail sales in the Eurozone fell for the
first time in three months in May, according to Markit’s latest PMI (Purchasing Managers' Index) survey. Moreover, sales were only marginally higher than one year
earlier, and retailers cut both staff levels and purchasing during the month. Of
the three largest euro economies covered, Italy remained the main source of
weakness, while France and Germany both registered slower growth.
The Eurozone Retail PMI is a single-figure indicator of changes in the value of
sales at retailers. The PMI is adjusted for seasonal factors, and any figure greater
than 50.0 signals growth compared with one month earlier. The PMI slipped from
52.2 in April to 48.8 in May. That was the lowest figure since October 2010, and
also below the long-run survey average (since January 2004) of 49.1. The latest
PMI figure was consistent with a
broadly flat trend in official retail sales (on a three-month on three-month
basis) as produced by the EU’s statistics office Eurostat.
Eurozone retail PMI figures
are based on responses from the three largest euro area economies. May data
signalled a persistent performance gap between Germany and France, and Italy. In
the latter, monthly sales fell at the steepest pace for nearly a year, while the
two largest Eurozone economies continued to record growth of retail sales.
said, the month-on-month increases in sales in Germany and France were the
weakest for seven and three months respectively. The retail
PMIs have placed Italy as the
worst-performing of the three countries thirteen times in the past fifteen
Across the Eurozone as a whole, retail sales were up only slightly on a year
earlier in May. This was in contrast to the trend seen in April, when retail
sales grew at the fastest annual pace in nearly three years (although this
partly reflected the timing of Easter in 2011 compared to 2010).
In line with the pattern
for month-on-month sales trends, Germany and France registered slower annual
growth of retail sales in May while Italy posted a steep fall.
In a further sign that the retail sector was contracting, the
value of goods purchased by retailers fell during the month. This was the first
drop in purchasing activity for seven months.
Moreover, it occurred despite a
further sharp rise in average wholesale prices, suggesting a steep fall in the
new items bought for resale. Purchase price inflation eased slightly since
April, but remained relatively sharp.
Reflecting intense cost pressures and declining sales values,
retailers suffered the worst drop in gross margins for a year in May. This
contributed to a decline in headcounts in the sector, the first since last
Commenting on the retail
PMI data, Trevor
Balchin, senior economist at Markit and author of the Eurozone Retail
"May PMI data signalled a downturn in the
Eurozone retail sector, as support from the key German and French economies
faltered and Italy continued to record a sharp drop in sales. Moreover,
year-on-year sales were only slightly higher in May, confirming that the later
Easter this year compared with 2010 had flattered annual growth in April. Data
for the first two months of Q2 suggest a steep slowdown in growth of consumer
spending in the single currency area.
"Retailers are also not seeing a lifting of pressure on their cost burdens,
unlike firms in other sectors.
Wholesale price inflation did not ease appreciably from April’s thirty-three
month high, while across manufacturing and services the rate of input price
inflation slowed sharply during the month, according to the latest flash PMI
data. As a result of elevated cost pressures and falling sales, retailers’ gross
margins deteriorated to the greatest extent for a year."
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.