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Wednesday, February 27, 2013 12:19 PM

Nobody Can't See Nothin'

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As expected (in this corner but certainly not from economic cheerleaders masquerading as economists), eurozone retail sales are plunging across the board, even in Germany. Let's take a look at a few key reports.


The Markit France Retail PMI shows sharpest drop in sales for six months.

Key Points:

  • Sales down markedly on both monthly and annual measures
  • Targets missed to greatest extent in series history
  • Purchasing activity falls at sharpest rate since July 2012 


The French retail sector was caught in a deepening downturn during February. Sales fell sharply on both a monthly and annual basis, while there was a survey-record shortfall versus previously set plans. Retailers’ gross margins continued to be squeezed by a combination of higher purchasing costs and strong competitive pressures. Stock levels and employment meanwhile both declined. The headline Retail PMI® registered 44.3 during February. The latest reading was down from 47.0 in January, and signalled the steepest month-on-month drop in sales since August 2012.

Gross margins in the French retail sector decreased further in February. The rate of contraction was marked and the sharpest since last October. Survey respondents indicated that margins had been squeezed by a combination of intense competitive pressures and higher purchasing costs.

The Markit Italy Retail PMI shows Retail sector remains firmly in contraction.
Key points:

  • Monthly rate of decline in sales slowest since last September, though still steep overall
  • Slowest decline in employment for two-and-a-half years
  • Further substantial drop in stock levels


The seasonally adjusted Markit Italian Retail PMI® climbed to a five-month high of 40.6 in February, from January’s reading of 37.5. This signalled that the monthly rate of decline in sales eased since the start of the year, but nevertheless still remained sharp overall.

Compared with the situation 12 months previously, Italian retail sales were down sharply in February. The year-on-year rate of decline was well in excess of the long-run series average, and slightly faster than in the preceding survey period. Retailers recorded a marked degree of underperformance during the latest survey period, with sales in February well down on levels previously planned for. Moreover, the difference between actual and targeted sales was greater than in the opening month of the year.

The Markit Germany Retail PMI shows Renewed decline in German retail sales.
Key Points:

  • Retail PMI below 50.0 level for second time in three months
  • Sharpest year-on-year sales decline since April 2010
  • Sales fall short of plans by widest margin since January 2012


The seasonally adjusted Germany Retail PMI dipped back below the neutral 50.0 value in February. At 47.6, down from 51.0 in January, the latest reading matched that seen in December and was the joint-lowest for ten months. Survey respondents commented on subdued household demand and lower consumer footfall in relation to unfavourable weather conditions in February.

Sales down sharply on a year-on-year basis

February data indicated that like-for-like sales were down sharply compared to one year earlier. The index measuring retail sales on an annual basis in Germany pointed to the fastest pace of contraction since April 2010. Around 40% of survey respondents noted a drop in sales compared to February 2012, while just one-in-four signalled an increase.

Targets missed to greatest extent in just over a year

Retailers in Germany signalled that their sales in February fell short of targets, and to the greatest degree since January 2012. Over three times as many respondents (46%) reported that sales were below expectations as those that exceeded their initial targets (13%). Although sales disappointed in February, retailers are optimistic on balance about the prospects for sales in one month’s time.
Eurozone Composite

The Markit Eurozone Retail PMI shows Record year-on-year fall in Eurozone retail sales in February.
Key points:

  • Fastest annual drop in revenues in nine-year survey history
  • Broad-based weakness by country
  • Retailers’ stocks of goods fall at strongest rate in over three years


Markit’s Eurozone retail PMI® data for February signalled a record year-on-year fall in retail sales revenues in the single currency area. Sales were also down sharply compared with January, as signalled by a PMI reading of 44.5, down from 45.9.

Retail Sales Germany, France, Italy

Germany registered a fourth decline in sales in the past seven months, while French retail sales fell for a survey-record eleventh consecutive month and at the fastest pace since last August. Italy continued to show the strongest overall decline, albeit the weakest since last September. All three countries registered stronger year-on-year falls in retail sales in February. The annual rates of decline in Germany, France and Italy were the
sharpest in 34, nine and two months respectively.
Abysmal (And Going to Get Worse)

I certainly see no reason to change my forecast that eurozone GDP will contract far greater than economists foresee, led by France and Germany.

As noted a month ago, the "Core" of Europe was down to Germany. Analysts and economists will soon discover "Europe is Rotten to the Core"

Mario Draghi did not save Europe with his LTRO program, all he did was delay the inevitable, and at a huge cost too.

One cost can be seen in the Italian elections where voters have had enough of Super Mario Monti, sweeping the technocrat prime minister out of office in a massive rout led by a surge in eurosceptic vote for Beppe Grillo. (See Youth Vote Propels Five Star Movement Into First Place as Largest Political Party in Italy).

In France, and also as expected in this corner Unemployment Highest Since 1997. French GDP estimates have been twice revised lower. They will be revised lower yet again.

How much more pain Greece, Italy, and Spain are willing to take remains to be seen, but it isn't infinite.

Eventually Will Come a Time 

I repeat my November 23, 2011 warning Eventually, Will Come a Time When ....
Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected.

All it will take, is for one charismatic person, timing social mood correctly, to say precisely one right thing at exactly the right time. It will happen.
When that does happen, expect to hear "Nobody could possibly have seen this coming!"

Clearly we need a new definition of "nobody" because "nobody" saw the rise of Beppe Grillo's Five Star Movement, and of course "nobody" saw the housing crash coming either.

Clearly, nobody can't see nothin'.

Mike "Mish" Shedlock

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