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

Key points

  • 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.

Key points

  • 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

Key Points

  • 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.”

Europe Synopsis 

  • The economic depression lingers in Italy.
  • Germany is back in growth mode but with strong inflation and inability of retailers to pass on input cost increases.
  • France, is barely back in expansion, but only after strong discount promotions. French retailers also suffer from a margin squeeze. Employment is still shrinking, albeit at a slow pace.

These imbalances highlight the structural problem of one centrally-planned Euro-interest rate across widely varying economic conditions.

Mike “Mish” Shedlock