Sales fell in Germany, France and Italy as retailers reported the adverse effects of the global financial market turmoil, rising job market insecurity and stretched household budgets:
- Italy saw the steepest drop in retail sales of the three countries covered. The rate of decline picked up sharply during the month with the month-on-month decline in the index the largest yet recorded by the Italian survey. The index plunged from 42.8 to 34.8.
- Sales fell in Germany, at the weakest rate of the current five-month sequence. The monthly sales index rose to 46.7, up from 44.6 in September.
- Sales in France fell for the first time in four months, and at the weakest rate of the three countries surveyed. The index fell from 50.5 in September to a six-month low of 48.5.
Euro-zone sales remained well down on a year ago in October, with the annual rate of decline gathering pace to the joint-second sharpest seen over the past four years. The year-on-year sales index fell from 43.4 in September to 41.4. The annual rate of contraction in Italy was the
second-strongest in the survey history, while more modest declines were seen in both France and Germany.
Sales by sector - food & drink posted annual sales growth
The downturn in year-on-year sales was again led by autos & fuel retailers. Sales of pharmaceuticals, household goods and clothing & footwear were also well below October 2007 levels. Only in the case of household goods did the rate of decline accelerate compared to one month previously. Food & drink was again the only sector to see an annual rise in sales revenues, boosted in many cases by higher prices. The impact of squeezed consumer spending was evident as the rate of growth slowed to the weakest in the current six-month sequence.
Sales against plans - targets missed by wide margin
The sales against targets index slumped from 40.1 in September to 36.4, indicating that targets were missed in October by one of the largest margins yet recorded by the survey, as consumers reined in spending. All three countries saw sales targets missed, with the greatest shortfall posted in Italy. By product sector, sales targets were missed to the largest extents in household goods and autos & fuel respectively.
Expected sales next month - pessimism highest since July 2005
Retailers became increasingly gloomy about future prospects in October. The number of retailers expecting to miss sales targets in November outnumbered those expecting targets to be beaten by the largest margin for over three years. The expectations index slid from a four-month high of 56.1 in September to 47.0. German and Italian retailers were markedly pessimistic, while French retailers expect targets to be beaten on average.
By product sector, only pharmaceuticals retailers expect to beat targets over the coming month. The greatest degrees of negative sentiment were indicated in clothing & footwear and autos & fuel.
Prices and margins - wholesale price inflation eases further, margins remain under pressure
Average prices paid by euro-zone retailers for goods for resale continued to rise in October, but the rate of increase slowed further, dropping to a 15-month low and running well below those seen during the summer. The prices index fell from 62.0 to 60.9. Purchase price inflation eased in both France and Italy but accelerated in Germany. By product category, food & drink continued to see the strongest inflationary pressures.
Despite the overall easing in wholesale price inflation in October, gross margins at euro-zone retailers continued to deteriorate in the face of weak demand. At 40.2, compared to 40.8 in September, the margins index was close to April's all-time low of 39.0. All three countries covered by the survey reported sharp deteriorations in margins, with the decline in Italy by far the largest ever recorded for any country by the survey.
Employment - staffing levels cut at steepest rate for four years
Euro-zone retailers cut staffing levels at the fastest pace for four years in October. The employment index continued the downward trend that has been evident throughout much of 2008 to date, slipping from 47.9 in September to 47.5, to signal a seventh consecutive monthly reduction in the retail workforce. Italy saw the largest cut in employment, followed closely by France. Retail employment in Germany was the largest since February 2007.
Retailers' buying and stock trends - purchasing falls for third straight month
The amount of goods purchased for resale by euro-zone retailers fell for the third month running in October, registering the third-largest monthly cut in buying since mid-2005. The buying index fell from 47.9 to 47.5. Whereas the amount of goods bought by retailers in Germany and France was largely unchanged on a month ago, a near-record fall was seen in Italy as retailers grew increasingly pessimistic about future sales.
Stocks of unsold goods were barely changed on September, with no significant alteration seen in any of the countries surveyed. In many cases, efforts to reduce stocks via lower purchasing were frustrated by disappointing sales.
