Things are about to get very interesting in Italy where consumers have gone a sudden spending hiatus. Bloomberg reports European Retail Sales Contract to 7-Month Low

European retail sales contracted in May to the lowest level since October 2010, driven by a “sharp drop” in Italy, Markit Economics said.



A gauge of euro-area retail sales fell to 48.8 from 52.2 in April, London-based Markit Economics said today in a statement. The index is based on a survey of more than 1,000 executives and a reading above 50 indicates month-on-month expansion.



Italian retail sales declined at the fastest pace in 11 months in May, while monthly increases in Germany and France, the euro area’s largest economies, were the weakest in seven and three months, respectively, Markit said.

Eurozone retail sales fell in May

Retail sales in the Eurozone fell for the first time in three months in May, according to Markit’s latest PMI (Purchasing Managers' Index) survey. Moreover, sales were only marginally higher than one year earlier, and retailers cut both staff levels and purchasing during the month. Of the three largest euro economies covered, Italy remained the main source of weakness, while France and Germany both registered slower growth.



Across the Eurozone as a whole, retail sales were up only slightly on a year earlier in May. This was in contrast to the trend seen in April, when retail sales grew at the fastest annual pace in nearly three years (although this partly reflected the timing of Easter in 2011 compared to 2010).



In line with the pattern for month-on-month sales trends, Germany and France registered slower annual growth of retail sales in May while Italy posted a steep fall.



In a further sign that the retail sector was contracting, the value of goods purchased by retailers fell during the month. This was the first drop in purchasing activity for seven months.



Moreover, it occurred despite a further sharp rise in average wholesale prices, suggesting a steep fall in the volume of new items bought for resale. Purchase price inflation eased slightly since April, but remained relatively sharp.



Reflecting intense cost pressures and declining sales values, retailers suffered the worst drop in gross margins for a year in May. This contributed to a decline in headcounts in the sector, the first since last November.

Retail Sales by Country





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