National variations widened to the greatest yet recorded by the survey:
- Italy was again the worst performing nation, with retail sales falling for the thirteenth consecutive and at the steepest rate in the survey history (the index slumped from 43.8 to a low of 36.4). Uncertainty regarding the current political situation was put forward by a number of retailers as being a possible cause of lower sales during the month.
- In France, retail sales rose for the third month running, with the increase supported primarily by higher food & drink sales values. The rate of growth was weaker than the previous two months (the index slipped from 58.8 in February to 53.3), but nonetheless remained robust and in marked contrast to the contraction seen throughout Q4 of last year.
- German retailers, meanwhile, saw a modest rise in sales for the second successive month, but the rate of increase was down slightly on the six-month high seen in February and weaker than that posted in France (the index fell from 52.1 to 51.5). Strong growth of sales in the food & drink sector sustained the overall index above 50.0.
Eurozone retail sales in March were lower than a year ago. Though marginal, the decline contrasted with the year-on-year growth seen in January and February (the year-on-year sales index fell from February's ten-month high of 53.5 to 49.3). Sales were depressed by worse weather conditions compared to one year earlier and also the deteriorating economic outlook. Year-on-year sales fell at a survey-record pace in Italy, offsetting continued growth in both France and Germany (at weaker rates in both cases).
Sales by sector - Annual sales down in all sectors except food & drink
For the second month running, food & drink was the only sector to see year-on-year growth of sales values in March, with the rate of increase easing only marginally from February's record high. Sales values were again inflated by rising prices. Clothing & footwear continued to record the steepest decline of all sectors, with year-on-year sales falling at the fastest rate for ten months (and the joint-fastest in two years). Sharp falls were also recorded in household goods and autos & fuel, while sales of pharmaceuticals were down modestly on a year ago.
Prices and margins - inflation close to survey high, led by food & drink
Prices paid for goods by retailers continued to rise sharply in March, with the rate of inflation exceeded by last November's four-year survey record high. The prices index rose from 65.8 to 67.4. Purchase price inflation remained relatively steep across all three countries, accelerating in both France and Italy and moderating slightly in Germany. By sector, food & drink retailers continued to report the sharpest overall rise in prices, while purchase price inflation climbed steeply to a new high in household goods and equaled previous records in both pharmaceuticals and autos & fuel.
Sharp rises in purchasing costs and falling sales combined to exert downward pressure on retailers' gross margins in March. The rate of decline in profits was far steeper than in the first two months of the year as weak demand limited retailers' ability to pass higher costs on to customers (the margins index dropped from 45.4 to 41.9, the second-lowest figure of the past twenty-six months). Margins declined at faster rates in all three countries covered by the survey, led by Italy (which posted a record fall).
Sales against targets - original plans missed by widest margin in thirty- three months
Eurozone retail sales in March missed retailers' targets to the greatest extent since June 2005. The index of actual sales relative to planned sales fell sharply from 41.2 to 36.4. Targets were again missed in all three countries, and in each case to a greater extent than in the previous month. By far the largest shortfall was seen in Italy - where targets were missed by a survey-record margin - followed by France. By sector across all countries, targets were missed for all sales categories, with particularly steep shortfalls seen for clothing & footwear, household goods (a survey-record) and autos & fuel. However, the March shortfall in food & drink was marginal, as high prices again helped to boost sales values.
Expected sales against targets - optimism weakens
Retailers were optimistic about targets being beaten in April, though less so than they had been about March. The expectations index fell from a nine- month high of 59.9 to 53.3. Buoyant optimism in France, and to a lesser extent Germany, was countered by expectations of targets being missed again in Italy. Sales are expected to beat targets across all product sectors except clothing & footwear.
Employment - growth slips to stagnation
Employment in the Eurozone retail sector was largely unchanged in March, with the index sliding from 51.1 in February to 50.1. Expansion of workforces was generally halted as retailers sought to reduce overheads in the face of rising purchase costs and subdued demand. Trends continued to vary by country, with modest growth in both France and Germany contrasting with a third successive monthly decline in Italy (where the retail workforce contracted at the fastest rate for over three and a half years).
Retailers' buying and stock trends - unsold goods build up at record pace
Though sales were down on both a monthly and an annual basis in March, the value of purchases made by retailers increased for the second month running. The index of purchases recorded to 51.2, from 51.8. However, the latest rise in purchasing values mainly reflected higher prices paid by retailers for their goods, as opposed to efforts to satisfy consumer demand. This was supported by the latest stocks data, which showed warehouse inventories of unsold goods expanding at a sharp rate during the month. The stocks index rose to a new high of 56.9, just beating the previous peak of 56.7 set in April 2006.
