Eurozone July retail PMI improves slightly on decent expansion in France, Germany

Retail sales in the Euro zone during the month of July improved slightly following decent expansion in France and Germany. However, it remained below the 50-point mark that demarcates expansion and contraction.

The eurozone retail purchasing managers’ index (PMI), climbed to 48.9 in July from 48.5 in June. It remained well below the benchmark point that signaled an improvement in the industrial and retail sector of the 19-country bloc, but at a slower pace. Also, the outcome of Brexit has shaken consumer spending, affecting the retail sector.

"While German and French retailers are enjoying periods of steady sales growth, their counterparts in Italy have endured back-to-back steep decreases in sales of the likes not seen for over two-and-a-half years," said Phil Smith, Economist, Markit.

According to a report by data-compiler Markit, factors expected by retailers to boost sales over the coming three months include marketing campaigns, promotional activities, increased tourism and the back-to-school period. In contrast, those factors expected by French retailers as likely to depress sales over the next three months include a difficult social climate, terrorism, fragile consumer confidence and strong competitive pressures.

However, French retailers are set to face a bi-polar business environment over the coming months, with some strong tailwinds but also some potentially tough challenges, reports said.

Meanwhile, the recent downturn has led retailers to pare back staff numbers, with July seeing an acceleration in job losses to the fastest since September last year. Another sharp decrease in gross margins in a relatively low-cost environment demonstrates how hard retailers are finding it to drum up sales, Smith added.