Eurozone Retail Downturn Deepens in August

Steven Bobson, Europe & Americas Editor
August 31, 2012 /

Eurozone retailers faced a deepening downturn in sales in August, according to PMI data from Markit.

Sales fell on a month-on-month basis for the tenth successive month – the second-longest sequence in the survey history – and at a faster rate than in July.

The Eurozone Retail PMI is an 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 declined from 46.4 in July to 44.4 in August, the lowest since May and indicative of a sharp fall in sales. The series started in January 2004, and the latest figure was below the long-run average of 48.8. Only once has the PMI remained below 50.0 for a longer period (from June 2008 to September 2009).

Eurozone retail PMI figures are based on responses from the three largest euro area economies. August data signalled worsening trends in all three countries, with no change in German retail sales accompanied by steeper rates of decline in both France and Italy.

August was only the second month in the past 23 where German retailers had not registered sales growth. The pace of contraction in Italy was the fastest in three months, but short of the survey record posted in
January. The sequence of falling sales in France was extended to five months, the longest registered
in three years.

Retail sales in the Eurozone continued to fall sharply on an annual basis in August. The rate of contraction accelerated to the fastest since May, and extended the current sequence of continuous decline to 15 months.

This was despite a further year-on-year increase in Germany, and reflected substantial declines in both France and Italy.

Employment at retailers in the Eurozone declined for the fifth month running in August. The rate of job
shedding remained modest, reflecting sustained workforce growth in the German retail sector. French retailers posted the steepest job cuts for over three years, while the rate of contraction in Italy eased since July.

The Prices Paid Index rose for the third month running from May’s 19-month low in August, signalling a strengthening rate of inflation of wholesale prices in the Eurozone. Sector data signalled that clothing & footwear and food & drink drove cost pressures in August.

Retailers’ gross margins continued to fall sharply in August. The rate of deterioration eased since July,
but was still among the fastest registered to date. Reflecting the relative strength of demand, Italian
retailers posted the steepest drop in margins, and German retailers the weakest.

Trevor Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said: “The downturn in the Eurozone retail sector showed no sign of letting up in August. The current tenmonth sequence of falling sales is the secondlongest in the survey history, behind that registered between 2008-09. The retail PMI data are
consistent with consumer spending having fallen in both the second and third quarters.

“Weakness was also broad-based by nation. The pace of decline in Italy gathered speed, but was still short of the record levels seen at the start of the year. France is seeing the longest run of falling retail sales for three years, while the three-month sales rally in Germany ended.

“Compounding retailers woes in August was another build-up in cost pressures, as wholesale prices rose at the fastest rate in four months. Survey data linked this to rising food and textile prices.”


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