Italy retail PMI witnesses sharp decline in July as sales growth underperforms

Italy’s retail sector’s Purchasing Managers’ Index (PMI) declined sharply in the month of July as sales growth underperformed during the period, albeit the least since March.

July’s decrease in retail sales was seventh in as many months. Moreover, the rate of contraction was sharp, as highlighted by the headline seasonally adjusted Markit Italy Retail PMI which tracks month-on-month changes in retail sales, registering 40.3, up only slightly from June’s 31-month low of 40.2.

Any reading below 50 signals falling sales, and the greater the divergence from 50, faster is the rate of change.

Retailers’ expectations for future performance moved in negative territory in July, with more companies expecting actual sales to be lower than plans in the month ahead, almost 20 percent than those predicting some degree of overachievement, around 5 percent.

Further, falling sales also weighed on retailers’ buying levels in July, with the value of goods bought for resale dropping for the ninth straight month. Items for resale continued to accumulate at retailers during July, marking six straight months of inventory growth. However, having eased to the weakest in this sequence, the rate of expansion was only marginal.

"Another sharp decrease in gross margins in a relatively low-cost environment demonstrates how hard retailers are finding it to drum up sales," said Phil Smith, Economist, Markit.