Compared with a year ago, sales were up for the sixth month running in September, and there were reports of increased capacity. However, the rise in annual sales was less marked than in August and well below the peak seen in May. The yearly sales index slipped to 52.5 from 53.8 (an index reading above 50 signals year-on-year growth of sales). Annual growth in retail sales was recorded in all three countries covered by the survey in September, led by Germany. Italy saw the weakest rise.
The strongest gains in sales were seen for toiletries & cosmetics, followed by food & drink and then household goods. The weakest sales performance was recorded for clothing & footwear, blamed in many cases on unfavourable weather, followed by autos & fuel.
Prices and margins
Prices paid for goods for resale by retailers rose at the fastest rate since data were first available at the start of 2004. The index hit 59.8 (up from 59.6 in August). Prices rose in Italy, France and Germany, in part due to manufacturers raising their list prices in order to pass on higher costs, especially for transportation. However, by far the strongest rise was seen in Germany, for the sixth successive month, where widespread price rises linked to January's planned VAT increase added substantially to inflationary pressures.
Retailers' gross margins deteriorated compared to August, albeit to a lesser extent than in any of the previous three months (the margins index rose from 44.2 to 45.4). Strong competition continued to limit the scope to raise prices and sales levels remained disappointing in many companies. Italy saw the sharpest drop in margins, as has been the case in each of the past eight months, reflecting weaker sales performance in the year-to-date relative to both France and Germany.
Employment
Eurozone retail sector employment rose for the sixth consecutive month, reflecting the sustained growth of sales over this period. The rate of job creation eased slightly further from July's survey high (an index reading of 51.1 from 52.1 in August), however, attributable to slower rates of job creation in Germany, France and Italy.
Sales against targets
Sales targets were again missed in September on average, and to a slightly greater extent than in August (42.6 versus 43.8 in August). Germany saw the largest shortfall. German retailers were also the least confident of beating their October targets, contrasting with widespread optimism in France and, to a lesser degree, Italy. Measured across the three countries, sales expectations were the highest for four months (61.2 against 54.9 in August).
Retailers' buying and stock trends
An indication of continued sales growth in October was also provided by a seventh successive monthly increase in the amount of goods bought for resale by Eurozone retailers. The index slipped from 51.9 to 51.7 but at a level above 50.0 merely signaled a slight easing in the rate of increase.
The continued growth of buying activity by retailers pushed up their stocks of goods for resale for the twelfth straight month. However, concerns over costs encouraged lean inventory management in many firms, resulting in the smallest rise for seven months (the stocks index fell from 52.1 in August to 51.1).
