French Retail Sales Fall at Slower Rate in September

Steven Bobson, Europe & Americas Editor
September 28, 2012 /

Latest data pointed to another month of falling sales in the French retail sector during September. However, the rate of decline eased on both a monthly and annual basis. Retailers cut purchasing activity further, leading to a slight reduction in their stocks of goods for resale. The rate of purchase price inflation quickened to the strongest in seven months which, combined with intense competitive pressures, maintained the squeeze on retailers’ margins.

The headline Retail PMI registered 47.9 in September, up from 44.2 in August. That was its highest reading for three months and indicative of a moderate rate of contraction. Nevertheless, the current period of decline now extends to six months, with panellists commenting on a tough economic climate and weak consumer purchasing power as factors contributing to the fall in sales.

Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said: “The decline in French retail sales eased in September, but conditions on the high street remain difficult, with sales having contracted for six straight months. Competitive pressures remain strong and continue to bear down on retailers’ margins. Last week’s Flash PMI data and the latest INSEE survey point to a deepening downturn in the wider French economy, which suggests trading conditions are set to remain tough for retailers.”

Sales also fell at a weaker rate on an annual basis in September. The latest year-on-year drop was the least marked in the current seven-month sequence of contraction. Anecdotal evidence suggested that, although demand conditions remained subdued and competition was strong, the fall in sales had been cushioned by favourable weather and successful marketing campaigns.

French retailers indicated that actual sales continued to disappoint relative to previously set plans in September. That said, the extend of the latest shortfall was the least marked since February. Panellists expressed optimism regarding the one-month outlook for sales, albeit to a lesser degree than signalled one month previously.

Factors expected by retailers to boost sales over the coming three months include good weather, successful commercial strategies, higher customer footfall and promotional offers. Those factors expected to depress sales include a fragile economy, lack of consumer confidence, increased taxes and regulation.

French retailers indicated another decline in their gross margins during September. The latest fall was marked, albeit the slowest in three months. A number of survey respondents signalled that prices had been cut amid a strong competitive environment.

Average purchasing costs in the French retail sector continued to increase in September. The rate of inflation was substantial, having accelerated to a seven-month high.

The value of goods ordered by French retailers for resale continued to decline in September. Correspondingly, inventories contracted for the third time in four months, albeit only marginally.

Although employment continued to fall in September, the rate of decline moderated. The latest reduction in staffing levels was the slowest in four months.

 

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