European PMI Retail Sales Collapse: Near-Record Drop in Italy Retail Sales; French Retail Sales Drop 9th Consecutive Month; Germany Retail Sales Back in Contraction
Near survey-record year-on-year fall in retail sales
Rate of job losses fastest since July
Business sentiment weakens to series low
Italy’s retail sector remained in a steep downturn in December, with sales dropping sharply according to both monthly and yearly measures. Gross margins decreased amid a further rise in average wholesale prices, while firms cut employment and purchasing activity in line with lower sales. The month also saw business sentiment hit a record low.
December data pointed to another sharp month-on-month drop in Italian retail sales. This was signalled by Italian Retail PMI® registering 36.8, up from November’s seven-month low of 35.5 but slightly below its average over the year as a whole of 37.2. The latest decrease in high street spending was the twenty-second in consecutive months, and attributed by panellists to greater tax burdens, weak consumer sentiment and media scaremongering.
When measured on a year-on-year basis, the decline in retail sales was one of the most marked since data collection began in January 2004. In fact, only in December 2008 and May 2012 have faster annual rates of decline been recorded.
Phil Smith, economist at Markit and author of the Italian Retail PMI®, said: “2012 surpassed 2008 as the worst year in the survey’s history, with the PMI showing sharp monthly contractions in high street spending throughout and never once climbing above its pre-2012 historic average. The series measuring year-on-year changes in sales hit a record low back in May and came close to that mark in the latest survey period as consumer spending power was weakened further amid added tax pressure. Firms persistent attempts to boost sales through discounts have proved largely fruitless over the past 12 months, such has been the extent of the downturn in demand among Italy’s households.”
Moderate reduction in sales since the previous month
Actual sales fall short initial expectations for December
Job creation was maintained
The seasonally adjusted Germany Retail PMI dropped to 47.6 during December, from 50.2 in November, signalling a moderate month-on-month contraction in like-for-like sales. December’s index reading was below the long-run series average (49.8) and pointed to the sharpest pace of contraction for eight months. Reports from retailers in Germany suggested that strong competition, unfavourable weather conditions and unexpectedly low consumer footfall had all contributed to lower sales.
December sales disappoint compared to targets
German retailers signalled that actual sales at their stores fell short of prior expectations in December, continuing the trend of weaker than expected sales for the ninth month running. Moreover, the degree to which sales failed to reach initial targets was the most marked for any December since that recorded in 2009. Meanwhile, expectations for sales in the month ahead were the weakest since December 2009, with some retailers suggesting that earlier than planned promotional discounting will have a negative influence on like-for-like sales in January.
Margins squeezed again
Operating margins in the German retail sector declined again in December, thereby extending the current period of contraction to 25 months. Anecdotal evidence suggested that lower margins reflected strong competition and a sharp rise in average cost burdens during the month.
France Economic Implosion
Underway; French Retail
Sales Contract 9th
Consecutive Month as Cost
Sales fall at sharper pace on both monthly and annual measures
Purchasing costs rise at strongest rate in ten months
Stocks of goods for resale decline at faster pace
French retailers reported another month-on-month decline in sales during December – the ninth in succession which is a survey record. Sales were also down on an annual basis, and fell well short of retailers’ plans. Gross margins remained under considerable pressure, partly reflecting a strong and accelerated rise in purchasing costs.
The headline Retail PMI® slipped to 46.8 in December, from 48.8 in November. The latest reading was indicative of a solid rate of contraction. Anecdotal evidence suggested that a difficult economic climate and low customer footfall had contributed to the drop in sales.
Actual sales at French retailers once again disappointed relative to previously set plans in December. The degree of undershoot was the greatest since August. Survey respondents are also pessimistic regarding the one-month outlook for sales.
Factors expected by retailers to boost sales over the coming three months include cold weather, new product launches and promotions. Those factors expected to depress sales include a weak economy, depressed consumer confidence and increased taxes.
Latest data indicated that French retailers’ gross margins remained under strong pressure in December. Margins have declined in every month since February 2008.
Wholesale prices faced by French retailers continued to increase in December. The rate of inflation accelerated to the sharpest since February. Panellists reported that suppliers had generally raised prices in order to pass on higher raw material costs.