Eurozone Retail Sales Fall for 9th Month Running in July
The Eurozone retail downturn continued at the start of the third quarter, according to PMI data from Markit.
Sales fell on a month-on-month basis for the ninth successive month – the joint-second longest sequence in the survey history – and at a faster rate than in June.
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 fell from June’s threemonth high of 48.3 to 46.4, signalling a robust fall in sales. The series started in January 2004, and the latest figure was below the long-run average of 48.8.
Eurozone retail PMI figures are based on responses from the three largest euro area economies. July data signalled a broad-based worsening trend compared with June, with all three national retail PMIs falling month-on-month. The French and Italian PMIs continued to signal falling sales, and the fastest rates of decline for two months.
Italy continued to post by far the steepest contraction. In Germany, retail sales increased for the third month running, but at only a marginal rate. The gap between the German and Italian retail PMIs remained substantial, but was the narrowest since September 2011.
Eurozone retail sales fell on an annual basis for the fourteenth successive month in July. The rate of
contraction was little-changed from June’s sharp pace, and much faster than the long-run average for the survey. Sales fell rapidly in Italy, extending the current sequence of decline to two-and-a-half years.
France also posted a steep fall, the fifth in successive months. Sales were up compared with a year earlier in Germany, and at the fastest rate since March.
Retailers cut back on staffing in July. The current period of job shedding now stretches to four months, and the rate of reduction accelerated to a 32-month record. French and Italian retailers reduced their workforces on average, with the steeper decline posted among the latter. Italian retailers have shed staff every month since January 2008.
In contrast, German retailers raised headcounts for the twenty-sixth successive month. Retailers reported stepping up promotional efforts to boost sales in July, but this failed to arrest the decline in revenues.
Reflecting widespread discounting, gross margins fell at the secondfastest rate in the survey history, with the respective index only just above the record low registered in December 2008. Profitability at retailers was also undermined by a faster rise in wholesale prices during the month.
Commenting on the retail PMI data, Trevor Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said: “June’s near-stabilisation in Eurozone monthly retail sales proved short-lived, as sales fell further in July. A broad-based weakening was evident as French and Italian sales dropped at sharper rates. This was despite efforts by retailers to offer discounts, which contributed to a near-record fall in gross margins across the Eurozone retail sector as a whole.
“German sales rose only marginally over the month, but were still higher than one year earlier. Further weakness looks likely during the third quarter. Italian retailers were at their most pessimistic regarding the short-term sales outlook since the survey started in 2004, while sentiment in France was the second-worst on record. Correspondingly, the value of new purchases by retailers across the Eurozone continued to fall at a near-record rate.”
“Compounding retailers’ woes in July was a sharper increase in average wholesale prices, the first notable acceleration since the start of the year following June’s slight upturn.”