Bloomberg PMI Signals Slowing Retail Sales Growth in December

NEW YORK, Jan. 5 /PRNewswire/ -- The Bloomberg Eurozone Retail Purchasing Managers' Index ("PMI(R)"), an indicator based on a mid-month survey of economic conditions in the euro area retail sector and providing data one month ahead of government-issued figures, recorded 52.1 in December, down from 53.7 in November. The latest reading signaled growth of sales for the ninth consecutive month, though also pointed to an easing in the rate of increase to the weakest seen over this period.

The latest rise in month-on-month sales reflected a further strong increase in Germany and a more modest expansion in France, although sales growth eased in both countries (in Germany the index was 55.2, down from November's six-month high of 57.7, and in France the index fell for the second month running to 52.4 from 53.5 in November). Growth in Germany and France contrasted with a drop in Italian sales, which fell in December at the fastest pace for eight months (the index slipped from 48.0 in November to 46.9).

The like-for-like annual rate of growth in Eurozone retail sales slowed sharply from November's three-year survey record high in December (the index was down from 57.0 to 53.1), but nonetheless signaled a year-on-year increase for the ninth consecutive month and the sixth-strongest monthly rise in the survey's history. Year-on-year growth of sales in Germany and France (particularly in the former) contrasted with a decline in Italy.

Sales by sector

In December, the strongest sales growth against the same period a year ago was indicated in household goods, followed by food & drink. Yearly sales rose only slightly in toiletries & cosmetics. Clothing & footwear retailers saw sales fall sharply on a year earlier and sales also fell in the autos sector, representing a marked contrast to October when auto retailers had reported a survey-record rise in sales. Clothing & footwear retailers blamed unseasonably warm weather for their poor performance.

Sales against targets

The strength of German retail sales in December was again attributed (in part) to consumers buying goods ahead of January's VAT rise, which resulted in sales falling only just short of planned targets for the second month running. Substantial shortfalls against targets were evident in Italy and, to a lesser extent, France, blamed on subdued consumer confidence and low disposable incomes in both countries. For the Eurozone as a whole, however, the overall shortfall against targets was the smallest since June (an index of 45.7 from 45.1 in November).

Looking ahead, retailers were positive regarding expectations of beating planned targets in January, but the degree of optimism fell sharply from the eight-month high seen the previous month. The index dropped from 63.3 to a five-month low of 52.9. German retailers were pessimistic, but Italian retailers were strongly confident of meeting targets in January. This suggests an impending reversal of current sales trends as the VAT rise in Germany hits January sales there and cash-strapped Italian consumers take advantage of New Year sales.

Prices and margins

Prices paid for goods for resale by retailers in the Eurozone rose in December at a pace almost unchanged on November's survey high. The prices index recorded 60.4, compared to 60.5 the previous month. Prices rose sharply in Italy, France and Germany, with the latter continuing to record by far the steepest rate of increase. Price hikes were only partly the result of suppliers raising their rates ahead of the January VAT rise in Germany, with higher transport costs and supply chain constraints widely cited by survey respondents.

Retailers' gross margins continued to deteriorate in the latest survey period, although the rate of decline was the third-weakest in the survey history as growing sales provided greater scope for retailers to pass on input price rises. The margins index rose from 45.7 to 45.9. Trends varied markedly by country, with margins in Germany unchanged from November, while profits fell in both France and Italy (with Italy seeing by far the sharper deterioration).

Employment

Eurozone retail sector employment rose for the ninth month in a row in December. The rate of job creation gathered pace for the second successive month but remained only modest, with the index rising to 51.5 from 50.9 in November. Retailers were reportedly concerned over costs and cautious regarding further sales. Employment rose in Germany, stagnated in Italy and fell slightly in France. Of note, the rate of job creation in Germany accelerated to a survey record high.

Retailers' buying and stock trends

The amount of goods bought for resale by Eurozone retailers expanded for the tenth consecutive month in December, at a similar rate to those seen in recent months (an index of 52.0 against 52.3 in November). Retailers' purchases increased to support future sales growth, especially in Germany. Only modest growth of purchasing by retailers was seen in France, while a fall was recorded in Italy for the second month running. Meanwhile, Eurozone retailers' stocks rose at the fastest pace for five months (the stocks index rose from 53.0 to 54.1), largely due to weaker than expected sales during the month.

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Notes to editors

The Bloomberg Eurozone Retail PMI is the first monthly report of its kind in Europe, providing businesses, governments, central banks, economists and analysts the most accurate and up to date insights and data into the Eurozone retail sector.

The index, compiled exclusively for Bloomberg by NTC Economics Ltd, questions more than 1,000 retail executives in Germany, France and Italy. These 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 Bloomberg Eurozone Retail PMI.

The survey tracks changes in retail sales, performance against sales targets, inventories, prices, employment and other key indicators. Data are published approximately one month ahead of government figures.

The Bloomberg Retail PMI report is first published exclusively for Bloomberg users on the BLOOMBERG terminal at 09:00 GMT, followed by a general press release and analysis on Bloomberg Television. January and February data will be released on the following dates:

-- January Data Released 30 January 2007

-- February Data: Released 27 February 2007