German Retail Hits 3 Month Low in July

Steven Bobson, Europe & Americas Editor
July 30, 2012 /

The recent rebound in German retail sales faded in July, with like-for-like sales rising only marginally
since the previous month.

At 50.3, down from 52.4 in June, the seasonally adjusted Germany Retail PMI signalled the slowest expansion in the current three-month period of growth. Survey respondents generally attributed July’s marginal increase in month-on-month sales to successful promotional activities at their stores.

Although actual sales increased only slightly since the previous month, they were up compared with one year previously. Moreover, latest data pointed to the strongest year-on-year improvement in German retail sales since March.

German retailers indicated that their actual sales fell short of their initial plans in July, and by the
greatest margin since January. Anecdotal evidence mainly cited weaker than anticipated underlying consumer demand.

July data indicated that retailers are downbeat about their prospects for reaching sales targets in one month’s time. The degree of negative sentiment was the most marked since that recorded in December 2009.

Staffing levels in the German retail sector increased in July, thereby extending the current period of expansion to 26 months.

However, the rate of job creation eased to its lowest so far in 2012, reflecting greater caution about the outlook for sales. Weaker than expected sales in July also contributed to a rise in stocks of goods for resale in the retail sector, with the latest increase the fastest since February.

Meanwhile, the value of goods ordered for resale was close to stagnation in July.

July data signalled that average prices paid by German retailers for their purchases increased since the previous month. Wholesale price inflation has been recorded for just over two-and-ahalf years, and the latest reading was the strongest since April.

Another rise in costs resulted in a steep reduction in gross operating margins during July. The latest drop in margins across the German retail sector was the fastest since March 2010.

Anecdotal evidence from survey respondents attributed part of the decline to price discounting strategies during July in response to subdued underlying consumer demand.

Tim Moore, senior economist at Markit and author of the report said: “Germany’s Retail PMI suggests that the sector is struggling for momentum over the summer, with monthly sales close to stagnation and behind target to the greatest degree since January.

“Margins were squeezed at the sharpest pace for nearly two-anda-half years, as stronger wholesale price inflation coincided with the need to stimulate demand through discounting on the high street. An air of caution has therefore swept the German retail sector, as highlighted by a slowdown in job creation and another pessimistic forecast for sales next month.”

 

Share your opinion