Sales trends varied markedly across the three largest euro area economies:
- Italian sales again showed a marked rate of decline. Although the pace eased compared to June (the month-on-month sales index rose from 36.3 to 38.2), it was nevertheless the fourth-steepest drop indicated over the history of that series.
- Retail sales also fell sharply in Germany, though to a lesser extent than in June. The month-on-month sales index rose from 44.9 to 46.4, but still indicated a rate of decline that was relatively steep by the historical standards of the series.
- Sales rose modestly in France, offsetting the fall seen in June. However, the rate of increase remained well down on the buoyant pace seen earlier in the year. The month-on-month sales index recovered from 48.7 to 51.3.
According to the survey, which tracks retail sales, performance against targets, inventories, prices, employment and other key indicators, Eurozone retail sales continued to run well below levels of a year ago in July. Eurozone sales posted the most severe annual rate of decline for three years over Q2 as a whole. Italy posted sharply lower sales than a year ago, while no change was seen in France and a slight improvement registered in Germany.
Sales by sector - food & drink posted annual growth in sales
Of the five product categories covered by the survey, food & drink retailers reported a year-on-year increase in sales revenues in July. However, gains in annual sales in part reflected higher prices rather than improvements in volumes. For the third successive month, the steepest decline was reported for autos & fuel, as deteriorating consumer confidence hit car sales. Annual sales of pharmaceuticals were marginally lower following two months of growth.
Prices and margins - higher wholesale prices and weak consumer demand hit margins again
The rate of increase in prices paid for goods by retailers remained elevated in July, picking up on June to register the fourth-highest pace yet recorded by the survey. The prices index edged up to 67.3, from 67.1. Purchase price inflation hit record highs in both Germany and Italy, but eased to a ten-month low in France.
The food & drink sector posted a much steeper increase in purchase prices than the four other product categories, which all registered similarly strong rates of inflation.
Retailers' margins were squeezed sharply again in July by a combination of rising wholesale prices and the need to offer discounts to price-conscious consumers. At 41.3, the margins index remained well below the 50.0 no-change level, up slightly from 39.9 in June. Italian retailers continued to report by far the sharpest deterioration in profit margins, though marked falls were also registered in both France and Germany. Lower margins were widespread across all five product sectors, with the steepest fall indicated in clothing & footwear.
Sales against targets - targets missed again in July
Sales again fell well short of targets in July. Although the shortfall was slightly less than that recorded in June, the extent remained high by the historical standards of the survey. The index of actual sales relative to planned sales rose from 35.1 to 38.1. By country, Italy recorded the worst performance against targets for the ninth successive month, while France and Germany posted shortfalls of similar strength. By sector across all countries, targets were again missed for all main sales categories. The extent of the shortfalls ranged from a very modest disappointment for food & drink to a particularly wide margin in the autos & fuel sector.
Expected sales against targets next month - overall pessimism surrounding August
On average, retailers in the Eurozone expected sales to fall below target in August. The expectations index slumped to 49.5, from 52.4. German retailers were more pessimistic than their French counterparts while, in contrast, Italian retailers expect targets to be beaten next month. By sector food & drink retailers anticipate targets to be beaten in August, with the worst performances forecast in autos & fuel and clothing & footwear respectively.
Employment - rate of job shedding unchanged on June
Retail sector employment fell for the fourth month running in July, with the rate of job losses unchanged on June's twenty-eight month record. The employment index held steady at 48.6. All three countries registered shrinking retail workforces, with French retailers reporting the steepest rate of decline (and posting the largest monthly fall since January 2006). In Italy, headcounts at retailers fell for the seventh consecutive month. Retail staffing levels were also trimmed in Germany, but very slightly.
Retailers' buying and stock trends - subdued retail buying led to slower growth of stocks
The value of goods purchased for resale by Eurozone retailers rose marginally in July, reflecting the need to keep stock levels low in the face of uncertain economic conditions and weak sales forecasts. The index of purchases registered 50.4, up from 49.8 in June. Higher purchases of stock in France and Germany were largely offset by a further sharp decline in Italy. The level of unsold retail stock rose at the weakest pace since last September, mainly as a result of recent subdued purchasing activity by retailers. The stocks index fell from 54.5 to 52.1. Germany saw the slowest growth, followed by France. In Italy, a robust increase in inventories reflected expectations of sales beating targets in August.
