Bloomberg PMI Signals Euro Retail Sales Fall at Weaker Rate

NEW YORK - Retailers Wind Down Stocks and Staff Levels

- Wholesale Prices Show Smallest Rise for over Three Years

The Bloomberg Euro-Zone Retail Purchasing Managers’ Index (”PMI(R)”),
based on a mid-month survey of more than 1,000 executives in the euro area
retail sector, provides data one month ahead of government-issued figures.
The PMI rose from 42.3 in February to 44.1 in March, signaling the smallest
monthly drop in the value of sales in five months. The first quarter has seen
an average monthly decline that was less steep than the record drop seen
during Q4 of last year. The March decline remained strong by the survey’s
historical standards, and sales have now fallen for ten consecutive months.

When compared to February, sales again fell in each of the three largest
euro countries:

- Italy saw the steepest overall fall in sales, but the month-on-month
sales index rose from 38.2 to 41.9, indicating an easing in the rate
of decline. The monthly drop in sales was the smallest for six
months, having eased markedly in recent months following November’s
record fall. Sales have fallen in each of the past 25 months in Italy.

- France also saw a moderation in the rate of sales decline, with the
pace easing from February’s record but remaining steep. The
month-on-month index rose from 42.6 to 45.7, rounding off a first
quarter that has seen the weakest sales performance in the history of
the survey. French retailers have reported falling sales in five of the
past six months.

- Germany was the only one of the three countries to report a steeper
drop in sales than in February, though the rate of decline remained
less marked than those recorded in the three months to January. The
month-on-month index for Germany fell from February’s four-month high
of 45.4 to 44.4. Sales in Germany have now fallen for ten successive
months.

The March survey also showed that euro area retail sales remained well
below a year ago on a like-for-like basis. The year-on-year sales index edged
up from 35.5 in February to 36.4, remaining below the 50.0 no-change level to
register the fourth-steepest annual decline since the survey began in January
2004.

Sales by sector - all sectors reported falling sales; autos saw smallest
decline

Sales fell compared to one year earlier across all five product
categories in March. The steepest fall was seen for clothing & footwear -
where sales contracted at the fastest annual rate for eleven months -
followed by pharmaceuticals (which saw a record drop). Food & drink retailers
also posted a faster yearly rate of sales decline, posting the second
steepest fall in the survey history. Annual rates of decline eased in both
household goods and autos & fuel, with the latter showing the weakest fall
for ten months and the smallest of all sales categories. This partly
reflected a boost from government incentives.

Sales against plans - sales continued to disappoint relative to targets

The sales against targets index rose from 35.1 to 36.9, staying well
below the 50.0 neutral level to indicate that sales objectives were again
missed by a wide margin. Targets proved to be too optimistic in all three
countries, albeit to lesser extents than in February. Italy again reported
the largest shortfall and Germany the smallest.

Sales sank below targets in all main product sectors, and were missed to
the greatest extent in clothing & footwear. Car scrapping incentives enabled
auto retailers to report the smallest shortfall of all product categories for
the second month running.

Expected sales next month - confidence at six-month high

Expectations for beating targets in the coming month rose to a six-month
high in March. The respective index rose from 50.1 to 55.8. Confidence has
improved in France - where forecasts for sales are the highest for eleven
months - and Germany, while Italian retailers’ expectations are neutral.
Retailers of food & drink and autos & fuel are again the most confident about
hitting targets, while household goods is the only category for which targets
are expected to be missed.

Prices and margins - price pressures weakest for 3 1/2 years

Prices paid for goods by retailers showed the smallest monthly rise since
August 2005. With the exception of an uptick in January, the rate of increase
has fallen steadily since the middle of last year as weaker demand, lower
commodity prices and competition among suppliers has softened inflationary
pressures. The prices index dropped from 53.9 to 53.0 in March. Cost
inflation moderated in Germany and France, and prices fell in Italy for the
first time in the survey’s history.

Gross margins at euro-zone retailers continued to worsen in March, but
the rate of deterioration eased for the third successive month from
December’s record to show the smallest decline since last September. The
margins index rose from 39.9 to 40.5. Of the three countries, Italian
retailers again reported the greatest weakening of margins (despite seeing
the smallest deterioration for eight months) while German firms reported the
weakest decline.

Employment - rate of job losses at five-year high

Euro area retailers cut their employment levels at the fastest rate since
February 2004, reducing staff numbers for the twelfth successive month. The
employment index slipped from 47.4 to 46.7 in March as the rate of job losses
gathered pace in all three countries covered by the survey. Italian retailers
reported the largest employment cut (the third-highest on record), followed
by France. German retailers reported the most marked acceleration in the rate
of job losses compared to February, seeing payrolls fall at the fastest pace
since February 2007.

Retailers’ buying and stock trends - stock levels in record fall

Retailers’ stocks of unsold goods fell for the seventh consecutive month
in March, dropping at the fastest rate in the survey’s five-year history to
set a new record for the third month running. The stocks index registered
45.7, from 46.9 in February, reflecting record falls in stocks in Italy and
France and a further drop in German retail inventories.

The stock run-down was largely deliberate, as retailers sought to reduce
overheads and keep inventories as low as possible in the face of subdued high
street demand. The value of goods purchased for resale by euro area retailers
fell sharply again in March, albeit to a lesser degree than the record fall
seen in February. The buying index rose from 40.3 to 43.4.

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Source: Bloomberg

Kristin Swenson of Bloomberg LP, +1-212-617-4264, or kswenson at bloomberg.net / NOTE TO EDITORS: The Bloomberg Retail PMI report is first published exclusively for Bloomberg users via the BLOOMBERG PROFESSIONAL(R) service at 09:00 GMT, followed by a general press release and analysis on BLOOMBERG TELEVISION. Data are published on the penultimate working day of each month. Forthcoming data will be released on the following dates: April data: Released 29 April 2009; May data: Released 28 May 2009