Real, seasonally and workday-adjusted retail sales:

August: -0.4% m/m, +0.6% y/y

MNI survey median: +0.2% m/m
MNI survey range: -0.2% to +0.3% m/m

July: +0.1% m/m (unrevised)
June: +0.3% m/m (revised from +0.2%)
May: +0.5% m/m (unrevised)
April: -0.9% m/m (unrevised)
March: +0.7% m/m (revised from +0.8%)
—

FRANKFURT (MNI) – Eurozone retail trade volumes fell in August
faster than even the most pessimistic forecasts had suggested, with a
decline in food, drink and tobacco sales more than offsetting a rebound
in non-food turnover, Eurostat reported on Tuesday.

On the month, retail sales slipped 0.4% in August, undoing the
modest gains from both July and June. Sales rose 0.6% on the year.

Food, drink and tobacco sales contracted 0.7% m/m, leaving annual
turnover at -1.1%. In contrast, non-food sales rebounded 0.3% after
July’s one-time dip for a +2.5% annual gain.

While a further breakdown for August is not available,
disaggregating July’s non-food sales sub-index showed broad gains on the
month, led by a 4.5% jump in textiles, clothing and footwear sales, and
a 3.0% m/m rise in pharmaceuticals.

Markit Economics’ Eurozone retail purchasing managers index slipped
to 48.7 in September, reflecting an additional decline on the month.
According to the PMI report, the slide was broad-based, with respondents
from Germany, France and Italy highlighting lower turnover.

However, the slides in both Germany and France were marginal, while
Italy’s decline was the second smallest in eight months. Furthermore,
taking the third quarter as a whole, German retail turnover was the
strongest seen since late 2006, leaving the Eurozone PMI for the quarter
at its highest since 2Q 2007.

“Overall, the Eurozone retail data still point to a sharper q/q
rise in consumer spending in Q3,” Markit senior economist Trevor Balchin
said.

In the second quarter, private consumption gained 0.5% compared to
1Q and contributed 0.3 percentage point to overall growth, while
household jobless fears continued to weaken, falling below the long-run
average to their lowest level in over two years, the European Commission
noted.

However, unemployment is still at record highs; global demand is
expected to slow as the economic recovery loses steam; wage growth is
subdued; and fiscal austerity measures are expected to begin biting.
These factors may well induce households to delay unnecessary purchases,
thus hampering retail turnover in the short-term.

Despite the reported decline in sales in September, retail
sentiment continued to strengthen last month, boosted by a brighter
current situation and expectations that reached their most optimistic
level in over two years, according to the Commission.

French retail sales fell 0.8% on the month in August, partially
undoing July’s notable gain, to more than halve the annual increase to
+3.1 from July’s +6.4% figure.

After hitting a trough in June, consumer sentiment in France has
steadily improved, reaching a five-month high in September, the national
statistics agency INSEE reported. However, the indicator and most of its
components remain well below the norm, including major purchase
intentions, which have been below the long-run average since November
2007.

Still, with purchasing power likely to strengthen in the second
half of this year, wage growth expected to outpace inflation and job
creation continuing, consumption growth should pick up modestly in both
3Q and 4Q, a recent INSEE report suggested. Currently, the statistics
office has penciled in an increase in private consumption of 0.4% in the
third quarter and +0.5% in the last three months of 2010.

Retail sales in Germany fell by a further 0.2% on the month in
August (+2.1% y/y), suggesting that a falling jobless rate, improving
consumer confidence and higher propensity to buy has not yet translated
into actual consumption.

German retailers polled by Markit reported a further contraction in
sales in September, representing “another setback for the German economy
during September,” Markit economist Tim Moore said. However, optimism
for October, measured in the same report, hit its highest level since
February 2008, with job growth in the retail sector seen at a three-year
high.

While retail sales data for Italy is not currently available,
ISAE’s latest sentiment survey showed a rebound in consumer morale in
September, with the personal economic climate sub-indicator recovering
to its highest level since February.

Still, Markit’s retail PMI for Italy slipped to 46.0 points last
month, pointing to “a significant slowdown in consumer spending during
the third quarter of 2010,” the PMI report read.

Turnover in the Spanish retail sector managed a strong 1.1% rebound
between July and August to give a -4.6% annual figure, despite the VAT
increase that had come into effect one month before.

Nevertheless, consumer morale in Spain dropped in September, as
worsening job prospects and personal finances undid most of the
improvements seen in both July and August, the Official Credit Institute
(ICO) reported. With unemployment at a record high and growing,
consumers are likely to limit their spending to essential items, which
should soon be reflected in retail turnover.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

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