Eurozone Retail Sales Grow In July
Aug 8, 2006
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The July Bloomberg Eurozone Retail Purchasing Managers' Index or PMI(R) signaled growth of retail sales in the single currency area for the fourth straight month at the start of Q3. The PMI is a monthly survey indicating economic conditions in the Eurozone retail sector 1 month ahead of government-issued figures.

The seasonally adjusted Eurozone Retail PMI posted 53.8 in July. The latest reading signaled a weaker rate of expansion than those indicated throughout the second quarter, but still a solid increase and one that was the fourth-fastest in the survey's 31-month history. Anecdotal evidence suggests a trend of rising consumer confidence continued. Other factors boosting retail sales during the month included promotional campaigns and the World Cup soccer events in Germany. The continued recovery of the sector at the start of the third quarter was underlined by a survey-record pace of retail employment growth, which has strengthened continuously during the current 4-month period of net job creation. However, the survey said there was evidence that overall trading conditions remained tough, with profits continuing to fall and purchase prices rising sharply.

Retail Growth
July data for the three major Eurozone economies that constitute the survey signaled that:

  • France recorded the sharpest growth in retail sales for the second month running (57.7).
  • The rate of growth in German retail sales eased further from May's high, but was solid nevertheless (54.2).
  • Italian retail sales declined for the sixth month running (47.6).

    The underlying upturn in demand signaled by July's survey was further highlighted by a fourth straight rise in annual sales (51.6). However, the pace of expansion eased to its lowest in the current growth period, as the rates of increase in Germany and France slowed. Year-on-year retail sales in Italy continued to fall.

    Margins and Prices
    Higher average purchasing costs and ongoing promotional campaigns continued to be the main forces driving retailers' gross margins lower in July (44.1). The rate of decline in profits picked up slightly since June, and Italian retailers posted the steepest fall in margins of the principal Eurozone economies. However, the latest fall in margins was weaker than the long-run average for the survey.

    Eurozone retailers' average purchase prices increased at the sharpest rate since April 2004 in July (59.5). Moreover, the rate of inflation was the second-highest indicated by the survey to date. Anecdotal evidence suggested a strong link between higher supplier rates and recent highs in global oil prices.

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

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