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Bloomberg PMI Shows Fall in Eurozone Retail Sales, Growth in Food and Drink Sales

    National variations widened to the greatest yet recorded by the survey:
     -- Italy was again the worst performing nation, with retail sales falling
        for the thirteenth consecutive and at the steepest rate in the survey
        history (the index slumped from 43.8 to a low of 36.4). Uncertainty
        regarding the current political situation was put forward by a number
        of retailers as being a possible cause of lower sales during the
        month.
     -- In France, retail sales rose for the third month running, with the
        increase supported primarily by higher food & drink sales values. The
        rate of growth was weaker than the previous two months (the index
        slipped from 58.8 in February to 53.3), but nonetheless remained
        robust and in marked contrast to the contraction seen throughout Q4 of
        last year.
     -- German retailers, meanwhile, saw a modest rise in sales for the second
        successive month, but the rate of increase was down slightly on the
        six-month high seen in February and weaker than that posted in France
        (the index fell from 52.1 to 51.5). Strong growth of sales in the food
        & drink sector sustained the overall index above 50.0.

Eurozone retail sales in March were lower than a year ago. Though marginal, the decline contrasted with the year-on-year growth seen in January and February (the year-on-year sales index fell from February's ten-month high of 53.5 to 49.3). Sales were depressed by worse weather conditions compared to one year earlier and also the deteriorating economic outlook. Year-on-year sales fell at a survey-record pace inItaly, offsetting continued growth in bothFrance andGermany (at weaker rates in both cases).

Sales by sector -- Annual sales down in all sectors except food & drink

For the second month running, food & drink was the only sector to see year-on-year growth of sales values in March, with the rate of increase easing only marginally from February's record high. Sales values were again inflated by rising prices. Clothing & footwear continued to record the steepest decline of all sectors, with year-on-year sales falling at the fastest rate for ten months (and the joint-fastest in two years). Sharp falls were also recorded in household goods and autos & fuel, while sales of pharmaceuticals were down modestly on a year ago.

Prices and margins -- inflation close to survey high, led by food & drink

Prices paid for goods by retailers continued to rise sharply in March, with the rate of inflation exceeded by last November's four-year survey record high. The prices index rose from 65.8 to 67.4. Purchase price inflation remained relatively steep across all three countries, accelerating in both France andItaly and moderating slightly inGermany. By sector, food & drink retailers continued to report the sharpest overall rise in prices, while purchase price inflation climbed steeply to a new high in household goods and equaled previous records in both pharmaceuticals and autos & fuel.

Sharp rises in purchasing costs and falling sales combined to exert downward pressure on retailers' gross margins in March. The rate of decline in profits was far steeper than in the first two months of the year as weak demand limited retailers' ability to pass higher costs on to customers (the margins index dropped from 45.4 to 41.9, the second-lowest figure of the past twenty-six months). Margins declined at faster rates in all three countries covered by the survey, led byItaly (which posted a record fall).

Sales against targets -- original plans missed by widest margin in thirty- three months

Eurozone retail sales in March missed retailers' targets to the greatest extent since June 2005. The index of actual sales relative to planned sales fell sharply from 41.2 to 36.4. Targets were again missed in all three countries, and in each case to a greater extent than in the previous month. By far the largest shortfall was seen inItaly -- where targets were missed by a survey-record margin -- followed byFrance. By sector across all countries, targets were missed for all sales categories, with particularly steep shortfalls seen for clothing & footwear, household goods (a survey-record) and autos & fuel. However, the March shortfall in food & drink was marginal, as high prices again helped to boost sales values.

Expected sales against targets -- optimism weakens

Retailers were optimistic about targets being beaten in April, though less so than they had been about March. The expectations index fell from a nine- month high of 59.9 to 53.3. Buoyant optimism inFrance, and to a lesser extent Germany, was countered by expectations of targets being missed again inItaly. Sales are expected to beat targets across all product sectors except clothing & footwear.

Employment -- growth slips to stagnation

Employment in the Eurozone retail sector was largely unchanged in March, with the index sliding from 51.1 in February to 50.1. Expansion of workforces was generally halted as retailers sought to reduce overheads in the face of rising purchase costs and subdued demand. Trends continued to vary by country, with modest growth in bothFrance andGermany contrasting with a third successive monthly decline inItaly (where the retail workforce contracted at the fastest rate for over three and a half years).

Retailers' buying and stock trends -- unsold goods build up at record pace

Though sales were down on both a monthly and an annual basis in March, the value of purchases made by retailers increased for the second month running. The index of purchases recorded to 51.2, from 51.8. However, the latest rise in purchasing values mainly reflected higher prices paid by retailers for their goods, as opposed to efforts to satisfy consumer demand. This was supported by the latest stocks data, which showed warehouse inventories of unsold goods expanding at a sharp rate during the month. The stocks index rose to a new high of 56.9, just beating the previous peak of 56.7 set in April 2006.

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Notes to editors

The Bloomberg Eurozone Retail PMI is the first monthly report of its kind inEurope, providing businesses, governments, central banks, economists and analysts the most accurate and up to date insights and data into the Eurozone retail sector.

The index, compiled exclusively for Bloomberg by NTC Economics Ltd, questions more than 1,000 retail executives inGermany,France andItaly. These countries together represent approximately 75% of total Eurozone retail sales. National data are weighted together according to each country's contribution to total Eurozone sales to form the Bloomberg Eurozone Retail PMI.

The survey tracks retail sales, performance against targets, inventories, prices, employment and other key indicators. Data are published approximately one month ahead of government figures.

The Bloomberg Retail PMI report is first published exclusively for Bloomberg users via the BLOOMBERG PROFESSIONAL(R) service at 09:00 GMT, followed by a general press release and analysis on BLOOMBERG TELEVISION. Forthcoming data will be released on the following dates:

-- April data: Released 29 April 2008

-- May data: Released 29 May 2008

SOURCE Bloomberg