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Eurozone Retail Sector Under Pressure

James Boston
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Eurozone Retail Sector Under Pressure

Difficulties in the consumer sector across the Eurozone have been underlined this morning by the release of the Markit Economics Retail Purchasing Manager Indices (PMI) for the month of August. The Eurozone and all three of it’s largest economies have posted not only a fall on July but also remain deep in contractionary territory. The headline Eurozone number is now reading at 45.8 compared to a showing of 47.6 in July. Germany has slipped to 49.4 from 52.1. France is at 45.5, a slight fall from July’s 45.6. Meanwhile, Italy has posted a significant drop from 43.4 to just 40.8.

The falling PMI data is a direct reflection of the troubled retail sector in the Eurozone. Yesterday’s Retail Sales figures for the single currency bloc missed market expectations, the month on month number showed a contraction of -0.4% in Retail Sales while the year on year number managed a gain of 0.8% but fell short of the anticipated 0.9% growth.

The slow deterioration of the return to growth within the Eurozone has adversely affected consumer confidence. The lack of inflation also removes some of the urgency around larger ticket purchases. This results in a vicious circle where consumers defer spending in either the anticipation of better value or the lifting of uncertainty around their financial circumstances.

Economies such as the UK and to a certain extent the US have managed to spark and sustain the early stages of their recoveries through consumer demand. It is beginning to appear that the Eurozone will not be in a position to avail of such methods, with the slowdown in manufacturing, exports and now consumer demand the authorities are facing significant challenges in creating sufficient stimulus to counter balance four years of austerity. The European Central Bank has an opportunity later today to announce it’s latest move to create a meaningful stimulus.

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