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by Mish

Earlier today I took a look at France. For details, please see France Economic Implosion Underway; French Retail Sales Contract 9th Consecutive Month as Cost Inflation Surges.

This article will look at Germany and Italy, the first and third biggest eurozone economies.


The Markit Italy Retail PMI® shows Steep downturn in high street spending continues in December.

Key points:
Near survey-record year-on-year fall in retail sales
Rate of job losses fastest since July
Business sentiment weakens to series lowSummary:
Italy’s retail sector remained in a steep downturn in December, with sales dropping sharply according to both monthly and yearly measures. Gross margins decreased amid a further rise in average wholesale prices, while firms cut employment and purchasing activity in line with lower sales. The month also saw business sentiment hit a record low.
December data pointed to another sharp month-on-month drop in Italian retail sales. This was signalled by Italian Retail PMI® registering 36.8, up from November’s seven-month low of 35.5 but slightly below its average over the year as a whole of 37.2. The latest decrease in high street spending was the twenty-second in consecutive months, and attributed by panellists to greater tax burdens, weak consumer sentiment and media scaremongering.
When measured on a year-on-year basis, the decline in retail sales was one of the most marked since data collection began in January 2004. In fact, only in December 2008 and May 2012 have faster annual rates of decline been recorded.
Phil Smith, economist at Markit and author of the Italian Retail PMI®, said: “2012 surpassed 2008 as the worst year in the survey’s history, with the PMI showing sharp monthly contractions in high street spending throughout and never once climbing above its pre-2012 historic average. The series measuring year-on-year changes in sales hit a record low back in May and came close to that mark in the latest survey period as consumer spending power was weakened further amid added tax pressure. Firms persistent attempts to boost sales through discounts have proved largely fruitless over the past 12 months, such has been the extent of the downturn in demand among Italy’s households.”


The Markit Germany Retail PMI® shows Retail PMI hits lowest level for eight months.

Key points:

  • Moderate reduction in sales since the previous month
  • Actual sales fall short initial expectations for December
  • Job creation was maintained
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The seasonally adjusted Germany Retail PMI dropped to 47.6 during December, from 50.2 in November, signalling a moderate month-on-month contraction in like-for-like sales. December’s index reading was below the long-run series average (49.8) and pointed to the sharpest pace of contraction for eight months. Reports from retailers in Germany suggested that strong competition, unfavourable weather conditions and unexpectedly low consumer footfall had all contributed to lower sales.
December sales disappoint compared to targets
German retailers signalled that actual sales at their stores fell short of prior expectations in December, continuing the trend of weaker than expected sales for the ninth month running. Moreover, the degree to which sales failed to reach initial targets was the most marked for any December since that recorded in 2009. Meanwhile, expectations for sales in the month ahead were the weakest since December 2009, with some retailers suggesting that earlier than planned promotional discounting will have a negative influence on like-for-like sales in January.
Margins squeezed again
Operating margins in the German retail sector declined again in December, thereby extending the current period of contraction to 25 months. Anecdotal evidence suggested that lower margins reflected strong competition and a sharp rise in average cost burdens during the month.

Italy Implosion Continues

Note that high street spending is in its twenty-second consecutive month of contraction.

Also note (and laugh at) the blame placed on “media scaremongering“.

Germany Back in Contraction

German retail spending is back in contraction and this time I expect it to stay there, while laughing at the blame placed on “unfavourable weather conditions and unexpectedly low consumer footfall“.

Signs point to a full-blown eurozone recession that is worsening nearly every month.

Germany cannot possibly be immune from this and indeed I blasted the IMF for proposing just that on January 9, 2012 in Dimwit Comment of the Day: Christine Lagarde, IMF Director says “Europe May Avoid a Recession This Year”

The idea Germany may avoid a recession is silly enough. The idea Europe may avoid a recession is downright idiotic.

Mike “Mish” Shedlock