| Italy Retail Sales Sharpest Drop in 17 Months; Germany Retail Sales Stagnate as Margins Squeezed; Eurozone Retail Sales Drop Sharply Posted: 01 Dec 2012 05:49 PM PST Dismal economic conditions in the eurozone accelerate to the downside as evidenced by falling retail sales. Let's take a look at the Eurozone in aggregate, as well as the three largest countries. Eurozone Retail Sales Drop Sharply The Markit Eurozone Retail PMI® shows Eurozone retail sales continue to fall sharply towards end of 2012. Key points
- Sales fall for thirteenth month running in November
- German sales remain flat while Italy records another severe fall
- Rate of decline in France slows to weakest in five months
Summary of November findings
The Eurozone retail sector remained stuck in a sharp downturn during the penultimate month of 2012, according to Markit's PMI® data. Sales fell for the thirteenth consecutive month, and remained well below the level seen one year earlier.
The PMI rose slightly in November to 45.8, from October's 45.3. The latest figure signalled a sharp fall in retail sales compared with one month previously, and the
average for the fourth quarter so far (45.5) is the second-lowest since Q1 2009. Moreover, the trend for 2012 so far (45.6) is the lowest annual average of any year since the survey started in 2004. The previous record low was in 2008 (46.1).
Retail sales across the single currency area fell on an annual basis for the eighteenth month running in November. The rate of decline was sharp, and
stronger than the average over this sequence. Year-on-year sales rose in Germany, but fell at a near-record pace in Italy. The annual rate of decline in France slowed since October, but remained sharp overall.
Comments
Commenting on the retail PMI data, Trevor Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said:
"November's set of numbers portrayed the weak position the Eurozone's retailers find themselves in going into the crucial festive season. Actual month-on-month sales continued to fall sharply, resulting in another marked drop compared with one year previously. The data are consistent with consumer spending having declined for five straight quarters come the end of the year. Italy Retail Sales Sharpest Drop in 17 Months The Markit Italy Retail PMI® shows sharpest drop in retail sales for seven months. Key points
- PMI falls to lowest since April
- High street employment falls at solid rate
- Sharper decrease in stock levels
Summary
Italian high street businesses recorded a further sharp decrease in sales in November, leading to more job losses in the sector. There was also a steep drop in purchasing activity as firms made efforts to reduce inventory levels. Meanwhile,
average prices paid for goods for resale rose at a modest rate largely on the back of higher oil-related prices.
The seasonally adjusted Italian Retail Purchasing Managers' Index® (PMI®) fell to a seven-month low of 35.5 in November, from October's reading of 37.3, signalling a further sharp month-on-month decrease in total high street spending. The headline
index has posted below the neutral mark of 50.0 continuously since March 2011, and remains below its average over that period.
In line with the sustained downturn in sales, November data showed that high street spending was down sharply compared with the situation one year previously. Furthermore, the annual rate of contraction was the steepest since May's survey
record. November saw actual sales again fall well short of planned levels, with the overall degree of underachievement the most pronounced for five months.
November data pointed to a further sharp decrease in retailers' gross margins, which anecdotal evidence suggested was the result of discounted selling prices as well as a fall in sales. The rate of decline was little-changed since the previous
survey period and faster than the historical trend. Also dampening profitability over the month was a rise in average purchase prices. Firms commonly linked the increase in their cost burdens to higher oil-related prices. Germany Retail Sales Stagnate as Margins Squeezed The Markit Germany Retail PMI® shows German retail sales continue to stagnate in November. Key points
- Month-on-month sales remain broadly unchanged
- Margins squeezed amid sharp rise in wholesale prices
- Actual sales underperformed initial targets in November
Summary
At 50.2 in November, the seasonally adjusted Germany Retail PMI was little-changed from 50.3 during October and, by remaining close to the 50.0 no-change value, signalled broadly stagnant month-on-month retail sales in Germany. This has been
the general trend throughout the second half of 2012 to date. Anecdotal evidence from survey respondents largely suggested that subdued consumer confidence was the main factor weighing on retail sales during November. French retailers report slower fall in sales during November The Markit France Retail PMI® shows French retailers report slower fall in sales during November. Key points
- Decline in sales eases to weakest in five months
- Gross margins fall at slower, albeit still marked, rate
- Further reductions in purchasing and stocks
Summary
The contraction in French retail sales continued in November, but at a weaker rate. Both the monthly and annual measures showed less marked declines. Sales once again disappointed relative to previously set plans. Gross margins continued to be squeezed, although the rate of decline moderated.
The headline Retail PMI® posted 48.8 in November, up from 46.0 in October. The latest reading was indicative of a moderate pace of decline that was the weakest since June. Where a decline in sales was recorded, this was generally attributed by panellists to a difficult economic climate, reduced levels of customer footfall and strong competition. European House of Cards This entire European house of cards comes crashing down the moment either Germany or France takes a sharp turn to the downside. I believe both are a given. As noted on November 29, French Unemployment Highest in 14 Years (And It's Going to Get Much Worse). Germany will follow (in a major way) the rest of Europe soon enough. It is simply impossible for the German export machine to keep humming with a massive slowdown in Asia, and an outright disaster happening in Greece, Italy, Portugal, and Spain. Warning bells are flashing loudly, but few hear the call. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 
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| Stalemate: Obama Warns of Prolonged Talks as Republicans Rebuff Plan Posted: 01 Dec 2012 07:56 AM PST The word of the day is "stalemate". Last year the Republicans had a chance to accept spending cuts to tax hikes at a 10-1 ratio. They declined. Now president Obama does not want to bargain. Who can blame Obama (except Republicans)? We may disagree, but that is part of the platform that got him elected. The Republicans do not want to bargain either. And who can blame them (except Democrats)? Regardless, Republicans blew a golden opportunity last year and that chance is gone. Obama has the upper hand now, and nothing will change that setup. I certainly am opposed to tax hikes without something substantial in return. Yet, if Obama holds his ground, the only way to have some cuts across the board right now is for the fiscal cliff to happen. Could it be that the best political outcome may actually be the dreaded "fiscal cliff"? The fiscal cliff will hit military spending but why shouldn't it? The US could easily defend itself on half its current budget actually. While pondering those questions and thoughts, please consider Obama Warns of Prolonged Talks as Republicans Rebuff Plan. President Barack Obama and House Speaker John Boehner stood their ground with opposing plans to avert the fiscal cliff and warned there was no quick path to a solution.
Obama has proposed a framework that would raise taxes immediately on top earners and set an Aug. 1 deadline for rewriting the tax code and deciding on spending cuts, according to administration officials.
It calls for $1.6 trillion in tax increases, $350 billion in cuts in health programs, $250 billion in cuts in other programs and $800 billion in assumed savings from the wind-down of the wars in Iraq and Afghanistan, according to the officials, who asked for anonymity.
Boehner said less than 30 minutes later during a news conference at the Capitol in Washington, that the proposal, presented to congressional leaders by Treasury Secretary Timothy F. Geithner, did nothing to move talks along.
"There's a stalemate, let's not kid ourselves," he said. Stalemate Solution The stalemate "solution" comes with its own set of problems. Contrary to popular belief, the risk is not that too much is done, but rather that both sides unwind nearly the entire "fiscal cliff", achieving no budget reductions at all. Speaking of which, it's high time we "stop kidding ourselves" about what is happening. There are no budget cutbacks at all under discussion. Rather the discussion centers around reductions in assumed increases, and politicians are having a tough time even with that. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 
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