- France registered the sharpest rate of decline, having posted a robust increase the previous month. The index dropped to 47.2, from September's five-month high of 54.2. Retailers reported a decline in consumers' purchasing power, linked in part to a rising tax burden.
- Sales fell for the first time in three months in Germany. Month-on month retail sales in the Eurozone's largest economy have declined six times in 2007 so far. There were reports that concerns over the outlook for the wider economy had negatively impacted on consumer sentiment. However, at 48.6, the latest index reading signaled a weak rate of contraction.
- Italian retail sales fell for the eighth successive month in October, with panelists reporting lower customer headcounts and economic uncertainty. However, the rate of decline eased significantly from September's low, as indicated by a sharp rise in the index from 44.1 to 48.0. The latest figure pointed to the weakest decline in retail sales since March.
Sales were also lower in October on an annual basis, having risen in September. The index fell from 52.5 to 48.1, indicating the fifth decline in annual retail sales of the past six months. Firms reported that weaker current economic conditions than a year earlier had deterred customers. In Germany, a solid fall in annual retail sales was recorded, partly the result of an upward spike last year prior to the VAT increase. Italian retail sales continued to fall sharply on an annual basis, and at the fastest rate for three months. In contrast, French retail sales were up compared to a year earlier for the second month running, though the rate of growth slowed sharply since September.
Sales by sector
Four out of five product sectors posted lower annual retail sales in October. The autos & fuel sector again showed the steepest rate of decline, though one not as marked as in the prior two months. Household goods also posted a sharp contraction, at a rate which picked up substantially from September. Annual sales of clothing & footwear fell in October having increased rapidly the previous month, while a marginal fall was indicated in pharmaceuticals. The food & drink sector bucked the overall trend, posting a further marked increase in annual sales values in October as prices surged.
Sales against targets
Sales in October were well short of planned levels as customer turnouts were worse than expected. Moreover, the index fell sharply from 45.0 to 38.3, pointing to a much more substantial shortfall than in September. All three countries posted sales figures that were well below targets during the latest survey period, with the most significant shortfall signaled among German retailers. At the product sector level, targets were missed to the greatest extents in autos & fuel, pharmaceuticals and household goods respectively.
Retailers in the Eurozone were, on the whole, confident that sales targets would be beaten in November. The expectations index fell to 55.4, however, pointing to the lowest degree of confidence for three months. French retailers were the most confident, followed by their Italian counterparts while German retailers were slightly optimistic. Retailers in four out of five product sectors were optimistic, the exception being household goods.
Prices and margins - further sharp acceleration in list price inflation to new survey record
Average list prices faced by Eurozone retailers rose at the fastest rate indicated in the forty-six month survey history in October. The index rose sharply from 63.6 to 66.1, and has now increased by over 9 points during the past four months. Retail sector list price inflation eased since September in Germany, though it still posted a stronger rate of inflation than both France and Italy. Food prices remained a key driver of inflation, with the product sector data showing by far the steepest increase in list prices in food & drink. The respective index leapt to a new high of 76.4 during the month, on the back of high prices for dairy products and wheat.
Retailers' gross margins deteriorated at a marked rate in October that was one of the sharpest indicated so far in 2007. The index rose slightly to 43.2, but was still below the average for the year to date (45.0). Lower profits were heavily linked to higher purchasing costs and compounded by poor sales which prompted retailers to step up promotional activities. Italian retailers posted the steepest fall in profits, followed by their German counterparts. Retailers registered the most substantial decline in margins, while profits rose further in clothing & footwear.
Employment - jobs growth maintained for eighth month running
The period of retail sector employment growth begun in March was maintained in the latest survey period. However, the rate of job creation remained weak. All three countries registered modest expansions in retail sector workforces.
Retailers' buying and stock trends
The volume of purchases made by retailers in the Eurozone fell in October, having expanded during the previous two months. At 49.4, down from 51.7, the index pointed to a marginal decline. Lower purchases were concentrated in the French retail sector, while marginal net increases were indicated in Germany and Italy. Lower purchases were primarily linked by panelists to a fall in sales.
Stocks of unsold goods expanded for the eighth month running in October. Moreover, at 53.8, the index pointed to the fastest rate of expansion of the current growth period. German, French and Italian retailers all posted higher inventories during the month, attributed to weaker-than-expected sales.
