Bloomberg PMI Shows Modest Growth in Eurozone Retail Sales

NEW YORK, August 30 /PRNewswire/ --

The Bloomberg Eurozone Retail Purchasing Managers' Index ("PMI(R)"), an
indicator based on a mid-month survey of economic conditions in the euro area
retail sector and providing data one month ahead of government issued
figures, rose back above the 50.0 no-change mark in August to 51.0,
indicating growth of Eurozone retail sales. Though only modest, the expansion
in August was a considerable improvement on July's marked contraction (as
signaled by a thirty-eight month index low of 46.2) and represented the first
increase in sales in four months.

Contrasting sales trends were recorded across the three countries covered
by the survey:

-- Germany recorded solid growth, with sales rising for the first time in
       four months following a sharp decline in July. An improvement in
       economic conditions, higher consumer spending and successful
       advertising were all cited as reasons for growth. The index recorded
       53.0, from 45.9 in July.

    -- Sales in France increased for the first time in three months, though
       only modestly and at a rate below that seen in Germany. Whilst
       advertising and the opening of new outlets were reported to have
       supported growth, there was again evidence that relatively poor 
       weather had dampened sales and footfall. The index increased to 51.1, 
       from July's 46.7.

    -- In contrast to the other two countries, Italy again recorded a decline
       in sales. It was the sixth successive month in which sales have 
       fallen, although the rate of contraction eased in August to its lowest 
       since March. The index posted 47.8, compared to 46.1 in July.



Although improving on the monthly measure, Eurozone August retail sales
were nonetheless well down on levels seen a year earlier. The year-on-year
index remained below the 50.0 no-change mark for a fourth successive month
and, at 45.1 from 45.8 in July, signaled the sharpest decline for nearly a
year-and-a-half. Sales fell across the region, with Germany recording by far
the strongest decline (sales fell at the fastest annual rate for seventeen
months). Relatively more modest falls were recorded in France and Italy, with
sales declining at the sharpest pace for three months in France and the rate
of contraction easing markedly in Italy.

Sales by sector

Annual sales were higher in food & beverage and pharmaceuticals during
August, with the latter sector recording a particularly strong rate of
expansion while the rise in year-on-year sales recorded in food & beverage
was only marginal. In line with the recent trend, sales in autos & fuels were
well down on a year ago, whilst there were marked falls registered in the
clothing & footwear and household goods sectors.

Sales against targets

Sales were again well below retailers' expectations during August, though
a rise in the index from the twenty-five month low of 36.8 to 38.7 indicated
that the shortfall was not as great as in July. Targets were missed to
varying extents across the region. The greatest shortfall was in Germany,
where targets were missed to the greatest magnitude for thirty-nine months.
Targets were also missed across all sectors, with the greatest shortfalls in
autos & fuel and clothing & footwear.

The index of retailers' expectations improved markedly on July's one-year
low of 51.8, rising to 58.3. French retailers were by far the most
optimistic, despite German and Italian retailers registering positive
sentiment following the pessimism seen in July. By sector, only household
goods registered negative sentiment. Of note, confidence in the autos & fuel
category reached a fifteen-month high.

Prices and margins

Reflective of continued price pressures in the supply chain, average
prices paid for goods by retailers rose at the sharpest rate in the survey
history in August. The index recorded 61.6, up from 57.7 in the previous
month, with a pick-up in inflation to a near five-year high in Germany
underpinning the overall increase in prices. Strong rises were also recorded
in France and Italy, with rates of inflation reaching four- and eight-month
peaks respectively.

Retailers' gross margins contracted at the sharpest rate for nineteen
months in August, as purchase prices rose sharply and pricing power remained
weak. The index recorded 42.6, down from 43.6, with Italian retailers
recording the sharpest deterioration in margins.

Employment

Retail sector employment in the Eurozone increased for the sixth month
running during August, although the rate of growth remained only modest and
was unchanged from July. The index recorded 51.3, with moderate rates of
expansion recorded across all three countries.

Retailers' buying and stock trends

Stocks of unsold goods increased in August for a sixth successive month,
as sales remained below expectations. The rate of growth was the weakest in
the current period of expansion, however, as highlighted by an index reading
of 51.4, from 52.3 in July. Strong inventory growth in France was offset by a
third successive monthly contraction in Germany.

Purchasing activity amongst Eurozone retailers increased marginally in
August, with the buying index improving on July's six-month low of 48.6 to
reach 50.7. Growth of purchasing was recorded in France and Italy, where
retailers looked to bolster stocks in line with sales expectations. In
contrast, there was a further fall in purchasing activity in Germany, where
respondents commented that the recent under-performance of sales had led them
to reduce their levels of input buying.

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