European November Retail Sales Fall as Shopping Halts

By Jurjen van de Pol

Nov. 27 (Bloomberg) -- European retail sales fell the most in at least five years in November as a recession eroded consumer confidence and spending, the Bloomberg purchasing managers’ index showed.

The measure of sales in the euro region declined to 41 from 44 in October, remaining below the 50 limit that indicates contraction for a sixth month. The gauge is based on a survey of around 1,200 executives compiled for Bloomberg by Markit Economics. The drop was the steepest in the near five-year history of the index.

The European, U.S., and Japanese economies will all shrink next year as the global financial crisis pounds companies and households, the Organization for Economic Cooperation and Development reported this week. Unemployment in the euro area is set to rise to 9 percent in 2010 from 7.4 percent this year, the OECD said.

“Consumers have become far more uncertain about keeping their jobs in the past months, they may have lost money in the stock market and in some European countries housing prices are declining, which isn’t exactly a stimulus for consumer spending,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “The economic climate makes people step up their precautionary savings.”

Spending Wanes

Sales fell in Germany, France and Italy in November, the Bloomberg survey showed. From a year earlier, euro-area sales declined, led by a slump in Italy.

Store revenue in Germany, Europe’s largest economy, also fell by a record this month as sales “considerably” lagged behind retailers’ targets, Markit said. Consumers postponed purchases and cut back spending on appliances and cars.

Volkswagen AG, Europe’s largest carmaker, and Porsche SE will temporarily halt output to cope with shrinking demand. Production is being cut after Volkswagen’s European sales fell 7.6 percent last month.

European confidence in the economic outlook fell to a 15-year low this month even after radical interest-rate cuts and government stimulus measures aimed at battling the impact of the financial crisis. An index of executive and consumer sentiment dropped to 74.9 from 80 in October, the European Commission in Brussels said today, taking the gauge to the lowest since August 1993.

New Jobs

“Deteriorating labor market conditions and the ongoing problems in the financial sector are likely to continue to exert downward pressure on retail indicators going forward, offsetting the benefit of recent declines in commodity prices,” said Ken Wattret, an economist at BNP Paribas in London, in a note to investors.

Consumers may hold back on holiday gifts during the annual spending peak. “Retailers were highly pessimistic about the prospects for sales during next month’s crucial Christmas period, with just over one-third of panelists expecting sales to underperform initial targets,” Markit said.

Bulgari SpA, the world’s third-largest jeweler this month scrapped a forecast for higher annual profit. Business is the worst since the slump following the attacks of Sept. 11, 2001, Chief Executive Officer Francesco Trapani of the Rome-based company said.

Profit margins are declining as stores offer discounts to attract clients, Markit said. Euro-region sales fell short of expectations in November and more than a third of German and Italian retailers expect to miss their targets again in the coming month.

The Bloomberg retail indicator is based on a panel of companies in Germany, France and Italy, counting for about 80 percent of total euro-area retail sales by value. The panel includes large chain retailers as well as smaller stores.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net