European Retail Sales Fall for 14th Straight Month, PMI Shows

By Emma Ross-Thomas

July 30 (Bloomberg) -- European retail sales fell for a 14th month in July as job cuts hurt household spending, the Bloomberg purchasing managers index showed.

The measure of euro-area sales declined to 47.3 from 47.5 in June when adjusted for seasonal swings. It has remained below the 50 mark, indicating contraction, since June of last year. The index is based on a survey of more than 1,000 executives compiled for Bloomberg LP by Markit Economics.

More than 3 million people have joined the euro region’s jobless rolls in the last year, and the Organization for Economic Cooperation and Development expects the unemployment rate to reach 12 percent in 2010, eroding spending power. Most Europeans think the worst of the crisis is still to come and a third of workers are “very concerned” about losing their jobs, a survey published on July 24 by the European Commission showed.

“The European economies are still in a fragile position,” said Howard Archer, chief European economist at IHS Global Insight in London. “Once the summer sales are out of the way, and if later this year inflation starts creeping up a little bit, and if unemployment is still rising, which I’m sure it will be, you’ve got to wonder how robust consumer spending will be.”

The retail-sales measure for Germany, Europe’s largest economy, rose to 49.8 from 46, while sales in France and Italy fell more steeply than the previous month, Markit said. Employment in the euro region’s retail industry contracted for a 16th month, the survey showed.

1,340 Jobs

Metro AG, Germany’s largest retailer, said on July 17 that it plans to eliminate 1,340 jobs at its domestic Cash & Carry wholesale unit to improve profitability. Adidas AG, the world’s second-largest sporting-goods maker, said in May it would cut more than 1,000 jobs to save money.

The retail-sales report contrasts with a series of industry and consumer surveys in the last month indicating the worst of the recession may be over. Italy’s consumer confidence increased to the highest in almost two years in July, data showed on July 28, and German business sentiment rose for a fourth month.

European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said on July 24 that it was too early to conclude from data that the recovery was near.

“For a few months now, we’ve been seeing positive data and not so positive data,” he told reporters. “We can’t yet count on the change in trend being lasting.”

Amid the seasonal discount period, sales of clothing rose, on an unadjusted basis, as the measure increased to 50.3 in July from 39.7. Gross margins across the industry fell further, to 41.6 on an adjusted basis from 42.1 in June, the survey showed.

Gross Margins

Luxottica SpA, the world’s biggest maker of eyeglasses, said on July 28 that second-quarter net income fell 13 percent to 115.7 million euros ($163 million). It said the business conditions improved in the first half.

Europe’s economy will return to growth in mid-2010 after contracting about 4.6 percent this year, according to the European Central Bank. The ECB has cut its benchmark interest rate to a record low of 1 percent and started buying as much as 60 billion euros of covered bonds to stimulate bank lending.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net