Skip to comments.The Euro Remains Europe's Biggest Problem
Posted on 07/31/2013 8:24:57 AM PDT by Kaslin
It's a mixed bag of retail PMI news in Europe today (assuming of course one believes that spending is good).
Italy: Sharpest drop in retail sales since April
In Italy, Markit reports Sharpest drop in retail sales since April
- Rate of decline in retail sales accelerates for second straight month
- Stocks levels fall amid sharp drop in retailers’ purchasing activity
- Purchase price inflation dips to modest rate
The downturn in Italy’s retail sector gained further momentum in July. The level of trade fell at a faster rate, leading to an accelerated decline in retailers’ purchasing activity and contributing to a deterioration in business sentiment. There were also further notable reductions in profitability, employment and inventory levels on the month.
July saw an acceleration in the month-on-month rate of decline in Italian retail sales, as highlighted by a drop in the headline Markit Italy Retail PMI® from 40.7 in June to 38.2. This was its lowest reading since April, and one that was indicative of a sharp pace of contraction overall. The level of trade has fallen continuously on a monthly basis for almost two-and-a-half years.
The gap between actual and planned sales was the widest for four months in July, as almost half of businesses missed their targets. Firms attributed their underperformance to a combination of uncertainty and pessimism among consumers.
Germany: strongest sales growth for two-and-a-half years
In Germany, Retail PMI indicates strongest sales growth for two-and-a-half years.
- Retail PMI hits highest level since January 2011
- New job creation maintained in July
- Wholesale price inflation eases since June
The seasonally adjusted Germany Retail PMI – which measures month-on-month sales on a like-for-like basis – registered above the 50.0 nochange mark for the third consecutive month in July. At 56.0, up from 55.3 in June, the latest reading signalled the strongest month-on-month increase in sales since the start of 2011.
Margins decrease again in July
German retailers pointed to a reduction in their gross operating margins for the thirty-second consecutive month, with the rate of decline little changed since June. Survey respondents widely suggested that higher cost burdens had offset the boost to margins from increased sales during July.
Latest data signalled a steep rate of input price inflation, although it was the second-slowest since September 2012. Some retailers commented on higher food costs, especially for fresh fruit and vegetables.
Commenting on the Markit Germany Retail PMI® survey data, Tim Moore, senior economist at Markit and author of the report said:
“July data shows a continuing improvement in German retail sector performance, as month-on-month sales growth hit a two-and-a-half year high. More favourable weather conditions and signs of rising consumer confidence helped underpin the acceleration in retail sales. Margins nonetheless remain under pressure as retailers indicated that they were forced to absorb sharp increases in their cost burdens during the latest survey period.”
France: Retail Sales Rise for First Time in 16 Months
In France, the Markit PMI shows Retail Sales Rise for First Time in 16 Months
- Slight expansion of sales recorded in July
- Slowest fall in employment for over a year
- Further reduction in purchasing activity
French retailers signalled a return to growth in sales during July. Although modest, the month-on-month increase was the first recorded since March 2012. Sales were also marginally higher on an annual basis. Employment continued to fall, but the rate of job shedding eased to a marginal pace. Retailers’ margins remained under considerable pressure, despite a weaker rise in purchasing costs.
The headline Retail PMI registered 51.0 in July, up from 48.9 in June and above the 50.0 threshold for the first time in 16 months. Anecdotal evidence suggested that sales growth was supported by improved demand conditions and promotional offers.
When compared with previously set plans, actual like-for-like sales once again fell short in July. However, the degree to which sales disappointed was the least marked since January.
Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said:
“The French retail sector finally snapped out of its extended downturn in July. Although sales were up only slightly, it was the first growth in 16 months, amid reports of firmer demand conditions. However, retailers were again faced with a considerable squeeze on their margins, as they competed to offer discounts in a bid to stimulate sales. Meanwhile, the slowest drop in employment for over a year points to an easing of the gloom that has enveloped the retail sector in recent times.”
These imbalances highlight the structural problem of one centrally-planned Euro-interest rate across widely varying economic conditions.
And according to what I just read, you can forget about Poland adopting the Euro anytime soon.
The biggest problem is the socialist state living beyond its means, but I’m willing to put the Euro in 2nd place.
Germany committed economic suicide going off its Mark and buying into the Euro nonsense (read: a working nation pays for a vacationing nation.)
Hogwash. The Europeans are Europe’s biggest problem. Together with the arabs.
News Flash: Europe is a continent not a country
And it’s a continent with aspirations to be a country. Or should I say, a Reich :).
Re: “The Euro Remains Europe’s Biggest Problem.”
This argument makes no sense to me.
Not one poor or economically distressed country in the Euro Zone has made ANY serious attempt to leave the Euro.
The only countries that seriously talk about leaving the Euro are the wealthy and successful countries!