Eurozone Retail Sales in 2015: Expansion in Germany and Italy, Contraction in France

Slow Recovery in 2015: Growth Prospects for the Global Economy

(Continued from Prior Part)

Rising retail sales in the Eurozone

According to Markit, the Eurozone Retail PMI (purchasing manager’s index) increased to 51.9 in September 2015, compared to 51.4 in August. Baring France, all other major Eurozone countries registered expansions in retail activity in September.

Consequently, the iShares MSCI Eurozone ETF (EZU) climbed by 0.76% to $35.8 as of October 6, though it was down 1.4% year to date. Retail stocks like Tesco Corporation (TSCDF) and J Sainsbury (JSAIY) were up by 1.75% and 11.2%, respectively, whereas Metro AG (MTTRY) and Morrison Supermarkets (MRWSF) were down by 2.7% and 11.1%, respectively, over the same period. While consumer staples companies Heineken (HEINY), Unilever (UL), and Danone (DANOY) jumped by 15.6%, 4.9%, and 3.2%, respectively, Henkel (HENKY) declined by 0.6% on YoY (year-over-year) basis as of October 6.

Germany’s and Italy’s retail sales

Despite the slowdown in its growth rate, good weather in Germany led to an increase in tourism activity in September 2015, and the launch of new products helped Germany’s (EWG) retail PMI rise to 54. Although the country’s gross operating margins squeezed further, this increase in retailer buying activity indicates optimism toward sales in coming months.

In Italy (EWI), retail sales showed the sharpest increase in September. Italy’s retail PMI grew to 51.7 in September, compared to 48.7 in August 2015. Increasing consumer confidence, the launch of new products, and an increase in real wage growth due to lower inflation helped this rise in sales. However, operating margins in the country remained low, and Italy saw plenty of job cuts in September.

France’s retail sales

Despite lower cost pressures, operating margins stayed lower in France (EWQ). France’s retail PMI contracted to 49.6 in September due to the weak economic environment and competitive pressures. Employment in France’s retail sector also decreased in September. However, retailers expect an increase in sales in coming months driven by new product launches, advertising campaigns, and the Christmas shopping period.

Overall, the health of Eurozone retailers appears to be on the rise with these increases in retailer buying levels. However, we may only see a strong rise in conjunction with growth across the broader global economy.

For more on this subject, you may be interested in reading the series Poor September Production Data Drags Related Sectors Down.

To remain updated on the economic front, please refer to our Global ETF Analysis page.

Browse this series on Market Realist:

• Part 1 - The China Slowdown and Global Growth Prospects for 2015

• Part 2 - Assessing the Strong Dollar and the US Trade Deficit in August 2015

• Part 3 - How China Affected Germany’s Factory Orders in August