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European Retail Sales Down In January
Feb 7, 2006
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Month-on-month sales at Eurozone retailers declined slightly in January 2006, according to the Bloomberg Eurozone Retail Purchasing Managers' Index, or PMI(R). The Bloomberg Eurozone Retail PMI is a monthly survey indicating economic conditions in the Eurozone retail sector 1 month ahead of government-issued figures.

The PMI is compiled for Bloomberg by NTC Economics Ltd., questioning more than 1,000 retail executives in Germany, France and Italy, which together represent approximately 75 percent of total Eurozone retail sales. National data are weighted together according to each country's contribution to total Eurozone retail sales to form the Bloomberg Eurozone Retail PMI.

The seasonally adjusted PMI dipped below the no-change mark of 50.0 in January to 49.7. This signaled a marginal decline in Eurozone retail sales from the previous month, following continuous growth throughout the fourth quarter of 2005. Falling retail sales during January were mostly attributed by survey respondents to consumer's continued reluctance to spend amid wider economic uncertainty. Lower sales resulted in missed sales targets and margins fell sharply.

Of the three major Eurozone economies covered by the survey, only France registered a decline in monthly retail sales in January (46.2). This was only the second time in the past 9 months that French retail sales had fallen, although the latest decline was sharp and more than offset higher sales in Italy and Germany.

Italian retail sales continued to increase at a robust pace in January to 53.2. Monthly retail sales in Italy have risen solidly since September, although the latest rate of growth was the weakest in this period.

German retailers in January registered a second successive month of growth in like-for-like sales, to 50.4, following 3 months of decline. However, the rate of expansion eased compared to December to a "marginal level."

A 21st consecutive month of falling year-on-year Eurozone retail sales was indicated by the survey in January, at a rating of 47.0. The rate of decline increased compared to December. Yearly sales fell at an especially marked rate in France, at 41.0, and also decreased in Germany, at 47.5. Italian retail sales in January were higher compared to a year ago, at 54.3.

Retail sales in the Eurozone fell short of targets to the greatest extent in 3 months in January, at 41.6. Panelists pointed to consumers' cautious spending behavior, which in some cases led to a decrease in sales turnover. Retailers did express confidence that February sales targets would be achieved.

Retailer Stocks
After expanding modestly the previous month, the volume of purchases made by retailers in the Eurozone declined in January, to 49.1. The contraction was primarily the result of lower sales during the month; as month-on-month sales fell only marginally, the rate of decline in purchasing in January was likewise slight. Retailers strive to keep purchases in-line with sales, so as to control stock levels. However, when actual sales missed targets, a slight expansion in stocks of goods for resale was registered in January, to 51.0.

Margins and Prices
With sales well short of targets in January and the continuation of aggressive marketing activity bringing about price discounts, retailers' gross margins fell sharply in January, to 40.0. Profits declines more quickly than in December, equaling previous survey lows in February 2004 and June and July 2005.

Retailers also pointed to higher purchase prices as a negative impact on profits during the month. Purchase price inflation in the Eurozone retail sector accelerated in January to a strong rate, 54.8, which is largely deemed a result of transportation costs.

Retail sector employment in the Eurozone declined for the fourth successive month in January, to 49.0, blamed on weak sales and pressure to reduce costs.

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