NEW YORK, July 30 /PRNewswire/ --

- Falling Consumer Confidence, Rising Energy Costs Blamed

The latest Bloomberg Eurozone Retail Purchasing Managers' Index
("PMI(R)"), based on a mid-month survey of economic conditions in the euro
area retail sector, rose from 44.0 in June to 46.0 in July. By remaining
below the 50.0 level, the index pointed to a further fall in sales during the
month despite an easing in the rate of decline from the steep pace seen in
June.

The PMI, which provides data one month ahead of government issued figures
based on interviews with more than 1,000 retail executives in Germany, France
and Italy, suggests that retail conditions remained difficult at the start of
the third quarter. The PMI indicates sales falling at a pace broadly similar
to the average recorded over the second quarter -- which had seen the
steepest drop yet recorded for any quarter over the survey history. Retailers
blamed the latest decline in sales on deteriorating consumer confidence,
economic uncertainty and household finances being squeezed by rising energy
costs.

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.

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