Bloomberg PMI Signals Fastest Fall in Eurozone Retail Sales for Almost Two Years in March

NEW YORK, April 6 The March Bloomberg Eurozone Retail Purchasing Managers' Index ("PMI(R)"), a monthly survey indicating economic conditions in the Eurozone retail sector one month ahead of government issued figures, indicated that Eurozone retail sales declined for the third successive month in March.

The seasonally adjusted Eurozone Retail PMI remained below the no-change mark of 50.0, signaling a further contraction in retail sales in the single-currency area. Moreover, the PMI fell to 47.2, its second-lowest reading since survey data were first collected and indicating the sharpest month-on-month contraction in retail sales since May 2004. According to retailers, the main factors behind the latest fall in sales were weak consumer confidence and extended winter weather conditions which discouraged customer activity at the end of the first quarter.

Germany, France and Italy all registered falling month-on-month retail sales in March. The upcoming general election in Italy was cited by retailers as a contributing factor to lower sales, which declined at the fastest rate since June 2005 (46.3). Sales also fell sharply in the German retail sector (46.5), following growth through December, January and February. In France, the contraction in monthly retail sales was only moderate (48.7), and weaker than that indicated in January.

Survey data indicated that the rate of contraction in Eurozone year-on-year retail sales picked up sharply in March, and was the strongest since October 2004 (41.4). Retailers blamed the steep fall in yearly sales on the different timing of Easter in 2005 and 2006, and also on worse weather conditions than twelve months ago. Annual retail sales fell sharply across each of the three of the principal Eurozone economies.

Sales Against Targets

Retailers in the Eurozone continued to see sales fall well short of their targets in March (38.6). Moreover, the extent to which original sales plans were missed was the greatest indicated for nine months. A combination of factors were reported to explain poor sales performance, including weakening consumer confidence, worse-than-expected weather and targets that were too optimistic. However, retailers expected the onset of spring and the Easter trading period to result in their April targets being met (67.8).

Retailers' Stocks

Reflecting confidence of improved sales performance next month, retailers in the Eurozone raised their levels of purchases in March (53.6). As sales continued to decline, growth of purchasing translated into higher stock levels (54.6), which was also attributed to the arrival of new product lines. Moreover, the rate of growth in stocks of goods for resale was the fastest indicated by the survey to date.

Margins and Prices

Eurozone retailers' purchasing costs rose sharply in March (56.5). Purchases price inflation was maintained at a rate above the survey's long-run average, though it eased from February. Increased wholesale rates were generally linked to higher oil prices, which fed through to a wide range of goods. With higher purchasing costs and falling sales, retailers' gross margins continued to fall sharply during March (44.9).

Employment

Eurozone retailers reduced staffing levels on average in March (49.0) as sales continued to fall and cost pressures mounted. A sharp downturn in French retail sector employment was signalled, while Italian retailers shed staff at only a marginal rate. In Germany, a slight rise in retail employment was recorded.

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