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News : EU Economy Last Updated: Aug 27, 2014 - 10:38 PM

Eurozone retail sales fall in July as downturns in France and Italy deepen
By Michael Hennigan, Finfacts founder and editor
Aug 12, 2014 - 7:26 AM

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Retail sales in the Eurozone fell in July as France and Italy both saw accelerated contractions in trade, the latest PMI (purchasing managers' index) figures from Markit showed. The fall in retail sales in the euro area was the most marked since May 2013 despite further, albeit slower, growth recorded in the currency bloc’s largest economy, Germany.

At 47.6, down from a neutral reading of 50.0 in June, the headline Markit Eurozone Retail PMI - - which tracks month-on-month changes in like-for-like retail sales - - pointed to a solid decrease in Eurozone retail sales at the start of the third quarter. July’s survey also showed that sales were sharply down on the year, with the annual rate of decline the fastest in 14 months.

Commenting on the data, Phil Smith, economist at Markit which compiles the Eurozone Retail PMI survey, said: "The Eurozone retail sector started the second half of the year on a weaker footing. The fragility of consumer spending was exposed by the PMI, particularly in France and Italy where the data showed sharper downturns in sales. Even in Germany, the one area of relative strength, there was an appreciable slowdown from June’s recent peak. Retailers underperformed relative to their targets to the greatest extent since March 2013, leading to further accumulations of unsold stock and the prospect of greater discounting ahead.”

Underlying July’s decrease in Eurozone retail sales were faster contractions in trade in both Italy and France. The former posted its most marked monthly decrease in like-for-like sales since February, having seen the pace of decline accelerate every month since May. France’s decrease in sales was the sharpest since May 2013 and the second in as many months. German retail sales on the other hand continued to grow, albeit at a much reduced rate compared with June’s near three-and-a-half year high.

Despite this renewed weakness, employment among Eurozone retailers rose fractionally (on average) for the second month in a row. Indeed, the rate of job creation at German retailers was little-changed from the solid pace seen in June, which was sufficient to offset further modest job losses in both France and Italy.

The level of spending among Eurozone retailers on items for resale dipped for the second time in three months in July, having been stable during June. Stock levels rose nevertheless, the accumulation a reflection of sales having been lower than expected. Moreover, the shortfall in sales was the most marked since March 2013.

Cost pressures faced by retailers remained mild in the context of historical data, with wholesale price inflation running below the long-run series average having dipped in July. Details suggested that falling buying levels among French and Italian retailers weighed on the pricing power of their suppliers.

July’s survey meanwhile highlighted a pessimistic outlook* among retailers regarding their future performance, with sentiment the most negative for a year.

* Companies are asked whether they expect next month’s sales to be higher, lower or the same as plans.

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.

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