Retail sales in the Eurozone fell for the
fourth month in a row in August, according to Markit’s latest PMI (Purchasing
Managers' Index). There
was also further evidence of the disparity across the region between Germany and
the rest, as a stronger rise in German retail sales was not enough to offset
weakness in France and Italy, the two next-largest euro economies. The overall
rate of decline accelerated slightly to the fastest since October 2010.
The Eurozone Retail PMI is a single-figure indicator of changes in the value
of sales at retailers. Markit says the PMI is adjusted for seasonal factors, and any figure
greater than 50.0 signals growth compared with one month earlier. The PMI
remained below 50.0 in August, signalling a fourth successive monthly drop in
sales revenues. It also fell to 48.0, the lowest in ten months. The latest PMI
figure suggested that recent falls in retail sales as measured by the EU’s
statistical office Eurostat in May and June (on a three-month-on-three-month
basis), would continue into the third quarter.
Eurozone retail PMI figures are based on responses from the
three largest euro area economies. In August, German retailers reported a
stronger outturn, posting the sharpest monthly gain in sales since April. Sales
growth in the largest euro economy has now been sustained for 11 months, the
longest sequence since the series started in January 2004.
Offsetting the stronger German retail sector in August was a
sharper decline in French retail sales. The rate of contraction compared with
the previous month was the strongest since February, and extended the current
sequence of declines to three months.
The third-largest euro economy, Italy, registered another steep fall in
retail sales in August. The monthly rate of contraction was broadly similar to
that posted in July, remaining stronger than the long-run series average.
Italian retail sales have fallen continuously for the past six months.
Markit said Eurozone retail sales were also lower on an annual basis in
August. The current sequence of year-on-year decline now stretches to three
months. Similar national trends were evident, with strong German growth being
more than cancelled out by rapid falls in both France and Italy.
Sales again disappointed next to original plans, leading to a
build-up of unsold stock. Retailers’ inventories of goods for resale rose for
the sixth month running, the longest sequence in three years. Moreover, the rate
of growth strengthened to a robust pace.
Consequently, the value of goods purchased by Eurozone
retailers fell slightly in August. Moreover, the
purchases fell more sharply, as average purchase prices continued to rise
rapidly during the month. This sustained inflationary pressure, added to weak
sales demand, led to a further marked deterioration in retail gross margins
A combination of falling sales and cost pressures led retail
employment to slow almost to a halt in August. Latest data marked a third
successive month of net job creation in the sector, but at only a negligible
Commenting on the retail PMI data, Trevor Balchin, senior
economist at Markit and author of the Eurozone Retail PMI, said: "Eurozone retailers continued to endure
challenging conditions mid-way through the third quarter. Sales continued to
fall, despite a stronger performance from regional champion Germany. The
divergence between Germany and Italy remains stark, while French retailers are
showing signs of slipping into a sustained period of falling sales.
"Reacting to the subdued market conditions, retailers aimed to limit growth
of unsold stock by cutting the value of their purchases. Moreover, retailers in
France and Italy cut workforces on average, almost halting the current period of
job creation in the sector at the Eurozone-wide level. Compounding retailers’
difficulties, cost pressures remain stubbornly high, having not eased off in the
way that recent PMI data for manufacturing and serviceshave signalled."
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.