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Dismal
economic conditions in the eurozone accelerate to the downside as evidenced
by falling retail sales. Let's take a look at the Eurozone in aggregate, as
well as the three largest countries.
Eurozone Retail Sales Drop Sharply
The Markit Eurozone Retail PMI® shows Eurozone
retail sales continue to fall sharply towards end of 2012.
Key points
·
Sales
fall for thirteenth month running in November
·
German
sales remain flat while Italy records another severe fall
·
Rate of
decline in France slows to weakest in five months
Summary of November findings
The Eurozone retail sector remained stuck in a sharp downturn during the penultimate
month of 2012, according to Markit’s PMI® data. Sales fell for the
thirteenth consecutive month, and remained well below the level seen one year
earlier.
The PMI rose slightly in November to 45.8, from October’s 45.3. The
latest figure signalled a sharp fall in retail sales compared with one month
previously, and the
average for the fourth quarter so far (45.5) is the second-lowest since Q1
2009. Moreover, the trend for 2012 so far (45.6) is the lowest annual average
of any year since the survey started in 2004. The previous record low was in
2008 (46.1).
Retail sales across the single currency area fell on an annual basis for the
eighteenth month running in November. The rate of decline was sharp, and
stronger than the average over this sequence. Year-on-year sales rose in
Germany, but fell at a near-record pace in Italy. The annual rate of decline
in France slowed since October, but remained sharp overall.
Comments
Commenting on the retail PMI data, Trevor Balchin, senior economist at Markit
and author of the Eurozone Retail PMI, said:
“November’s set of numbers portrayed the weak position the
Eurozone’s retailers find themselves in going into the crucial festive
season. Actual month-on-month sales continued to fall sharply, resulting in
another marked drop compared with one year previously. The data are
consistent with consumer spending having declined for five straight quarters
come the end of the year.
Italy Retail Sales Sharpest Drop in 17
Months
The Markit Italy
Retail PMI® shows
sharpest drop in retail sales for seven months.
Key points
·
PMI falls
to lowest since April
·
High
street employment falls at solid rate
·
Sharper decrease in stock levels
Summary
Italian high street businesses recorded a further sharp decrease in sales in
November, leading to more job losses in the sector. There was also a steep
drop in purchasing activity as firms made efforts to reduce inventory levels.
Meanwhile,
average prices paid for goods for resale rose at a modest rate largely on the
back of higher oil-related prices.
The seasonally adjusted Italian Retail Purchasing Managers’ Index®
(PMI®) fell to a seven-month low of 35.5 in November, from October’s
reading of 37.3, signalling a further sharp month-on-month decrease in total
high street spending. The headline
index has posted below the neutral mark of 50.0 continuously since March
2011, and remains below its average over that period.
In line with the sustained downturn in sales, November data showed that high
street spending was down sharply compared with the situation one year
previously. Furthermore, the annual rate of contraction was the steepest
since May’s survey
record. November saw actual sales again fall well short of planned levels,
with the overall degree of underachievement the most pronounced for five
months.
November data pointed to a further sharp decrease in retailers’ gross
margins, which anecdotal evidence suggested was the result of discounted
selling prices as well as a fall in sales. The rate of decline was
little-changed since the previous
survey period and faster than the historical trend. Also dampening
profitability over the month was a rise in average purchase prices. Firms commonly
linked the increase in their cost burdens to higher oil-related prices.
Germany Retail Sales Stagnate as Margins
Squeezed
The Markit Germany
Retail PMI® shows
German retail sales continue to stagnate in November.
Key points
·
Month-on-month
sales remain broadly unchanged
·
Margins
squeezed amid sharp rise in wholesale prices
·
Actual
sales underperformed initial targets in November
Summary
At 50.2 in November, the seasonally adjusted Germany Retail PMI was
little-changed from 50.3 during October and, by remaining close to the 50.0
no-change value, signalled broadly stagnant month-on-month retail sales in
Germany. This has been
the general trend throughout the second half of 2012 to date. Anecdotal
evidence from survey respondents largely suggested that subdued consumer
confidence was the main factor weighing on retail sales during November.
French retailers report slower fall in sales during November
The Markit
France Retail PMI® shows French retailers report slower fall in sales during November.
Key points
·
Decline in
sales eases to weakest in five months
·
Gross
margins fall at slower, albeit still marked, rate
·
Further
reductions in purchasing and stocks
Summary
The contraction in French retail sales continued in November, but at a weaker
rate. Both the monthly and annual measures showed less marked declines. Sales
once again disappointed relative to previously set plans. Gross margins
continued to be squeezed, although the rate of decline moderated.
The headline Retail PMI® posted 48.8 in November, up from 46.0 in October.
The latest reading was indicative of a moderate pace of decline that was the
weakest since June. Where a decline in sales was recorded, this was generally
attributed by panellists to a difficult economic climate, reduced levels of
customer footfall and strong competition.
European House of Cards
This entire European house of cards comes crashing down the moment either
Germany or France takes a sharp turn to the downside.
I believe both are a given.
As noted on November 29, French
Unemployment Highest in 14 Years (And It's Going to Get Much Worse).
Germany will follow (in a major way) the rest of Europe soon enough. It is simply
impossible for the German export machine to keep humming with a massive
slowdown in Asia, and an outright disaster happening in Greece, Italy,
Portugal, and Spain.
Warning bells are flashing loudly, but few hear the call.
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