The September Bloomberg Eurozone Retail Purchasing Managers' Index (“PMI”), a monthly survey indicating economic conditions in the Eurozone retail sector one month ahead of government issued figures, indicates that month-on-month sales at Eurozone retailers declined in September. While only a marginal fall to 49.7, the figures signal an end to the short-lived recovery of demand in the sector.
The seasonally adjusted Bloomberg Eurozone Retail PMI fell below the no-change mark of 50.0 in September, only a month after reaching a survey high. Retailers reported reduced average consumer spending and a perceived lack of consumer confidence in the wider economy, exacerbated by concerns over oil prices. Sales were further hampered by retailers continued reliance on aggressive promotional activity to bring in shoppers.
A sharp fall in German retail sales compared to last month (45.2) more than offset higher sales in the French and Italian retail sectors. Reversing the trend from last month and rising for the first time in over a year, Italian retail sales (54.4) bolstered the region. French retail sales (51.1) remained stable and above the no-change mark for the fifth month in a row.
Sales Against Targets
The latest survey data signaled that retailers across the Eurozone failed to achieve their original sales plans in September (39.5). Retailers reported that consumers had become increasingly cautious in their spending, as the wider economic outlook remained uncertain. Across the Eurozone, retailers were also pessimistic regarding next month's targets (48.8).
Retailers' Stocks
The value of purchases made by retailers in the Eurozone fell in September (49.1), as firms failed to meet sales targets and sold from existing stocks. As a result, inventories of goods for resale fell for the second month running (48.9). In Italy, however, the latest fall in inventories was attributed to the unexpected growth in sales during the month.
Margins and Prices
In order to minimize the decline in sales, many Eurozone retailers were forced to extend promotional activity into September. Promotions were a key factor behind the latest sharp fall in profit margins (41.6), which was exacerbated by an acceleration in purchase price inflation during the month. On average, purchase prices rose at their sharpest rate for five months in September (54.2).
Employment
Retailers in the Eurozone expanded their workforces for the third successive month in September (50.2), as premises were extended and sales drives intensified to generate sales. The overall rise in retail sector employment was reflected in all three of the principal Eurozone economies during the month, which registered broadly similar rates of marginal growth.
