January 2014 Eurozone retail PMI (purchasing managers' index) data from Markit showed the first rise in sales for five months. And although only slight, the increase was the fastest since April 2011. Germany was the driver of growth, posting its most marked improvement in trade since August. France’s drag on the currency union’s overall performance meanwhile diminished as sales there fell at a much slower pace than in December, whereas Italy saw another solid decrease. The Markit Eurozone Retail PMI – which tracks month-on-month changes in the value of retail sales – registered at a 33-month high of 50.5 in January. Although indicative of only marginal growth, this latest index reading was nevertheless a marked improvement from 47.7 in December. Sales were still notably lower compared with the situation one year ago, however. Commenting on the data, Phil Smith, economist at Markit and author of the Eurozone Retail PMI, said: "January’s rise in sales is of course good news, but being only the second in the past 27 months means it’s coming off of a very low base. Furthermore, growth was confined to just Germany, with retailers in France and Italy still contending with low consumer confidence and squeezed household incomes. Other indicators in the survey gave mixed signals, with job shedding easing to only a marginal pace but buying levels falling slightly faster." Eurozone retail PMI data are based on national data for the three largest Eurozone economies. Germany recorded a solid and accelerated increase in sales at the start of the year, the fastest since August. France meanwhile posted a fifth straight monthly decrease in retail trade, though the rate of decline eased sharply since December to only a marginal pace, and one that was the slowest in this sequence. Italy remained the main area of weakness, with retail revenues there falling at a solid rate that was little-changed from the preceding survey period. Employment at retailers in the euro area decreased again, but the net rate of job losses was the least marked in the current five-month sequence. This reflected slower falls in staffing levels in both Italy and France. German retailers continued to add to their payroll numbers, though job creation eased to a four-month low. Stocks of goods for resale at Eurozone retailers rose to the greatest extent in more than a year-and-a-half in January. With spending on resale items having fallen on the month, data suggested that this was in part due to sales being lower-than-expected. Indeed, retailers confirmed that they had generally underperformed relative to their targets. January’s survey showed a fractional rise in purchase price inflation in the Eurozone retail sector, which in turn acted to further squeeze gross margins. German retailers again faced the strongest cost pressures, as has been the case in each of the past three months. At the aggregate level, retailers specialising in pharmaceuticals recorded the steepest rise in wholesale prices. For the Retail PMI, Markit has recruited a representative panel of retail companies in France, Germany and Italy. Together, these three countries account for approximately 62% of total Eurozone retail sales by value.

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