The August Bloomberg Eurozone Retail Purchasing Managers' Index, a monthly survey indicating economic conditions in the Eurozone retail sector one month ahead of government issued figures, signaled growth of retail sales in the single currency area for the fifth successive month, though the rate of increase eased since July.

The seasonally adjusted Eurozone Retail PMI remained above the no-change mark of 50.0 for the fifth successive month in August, signalling further month-on-month growth in Eurozone retail sales. At 52.3, the PMI pointed to a moderate expansion. Anecdotal evidence from survey respondents suggested rising customer activity as underlying sentiment improved. Expanded product ranges were also reported to have boosted sales during the month. However, the rate of growth in monthly retail sales eased for the third month running from May's survey high. Moreover, retailers continued to face strong inflationary pressure on purchasing costs, which contributed to a further sharp fall in profits during August.

The two largest Eurozone economies registered month-on-month growth in retail sales in August. The stronger rate of expansion was again seen in France (55.1), where retail sales grew more sharply than in Germany (52.1) for the third straight month. However, both countries registered weaker increases in sales than last month. The third economy covered by the survey, Italy, registered falling retail sales for the seventh month running (48.7), albeit at a weaker rate than in July.

Retail sales in the single currency area were up on a yearly basis for the fifth successive month in August (53.8). An improved climate of demand in the wider economy was cited by panellists as being the key factor behind the latest annual growth in sales, which was robust and sharper than the rate registered in July. Annual growth in retail sales was strongest in Germany, followed by Italy.

Margins and Prices

Rising demand for retail goods and wider inflationary pressures led to a further acceleration in list price inflation in the Eurozone retail sector in August, the third in successive months (59.6). Moreover, the rate of purchase price inflation was the second-sharpest indicated by the survey to date. German retailers saw purchasing prices rise sharpest, linked in part to the upcoming rise in VAT.

Higher list prices and extensions to store capacities were major reasons given by retailers for the latest sharp fall in their gross margins in August (44.2). However, the rate of decline was almost unchanged since July, and was weaker than the long-run survey average.

Employment

The Eurozone retail sector workforce expanded for the fifth successive month in August, in line with the trend in rising sales turnover (52.1). Moreover, the rate of job creation eased only slightly from the survey high recorded in July. Retail employment increased in Germany, France and Italy during the month.

Retailers' Stocks

Eurozone retailers increased their levels of purchasing in August to support higher sales demand (51.9). A further net rise in stocks of goods for resale was also indicated by the survey (52.1), as the positive trend in sales turnover was expected to continue. However, the rates of growth of purchasing activity and stocks eased since July, partly due to retailers' increased concerns over rising prices.

Sales Against Targets

Sales targets were missed in August (on average), which a number of retailers linked to poor weather (43.8). However, the shortfall in sales against targets narrowed since July and was less marked than the survey average. Retailers were confident of beating their September targets (54.9).