Retail sales in Italy continue to fall sharply, with the latest PMI survey data showing another steep decrease in July. This was the seventh straight month that sales have fallen in the country.
The report said the decline contributed to further job cuts and the scaling back of retailers’ spending on goods for resale. Meanwhile, cost pressures were relatively subdued, amid reports of supplier promotions.
The headline seasonally adjusted Markit Italy Retail PMI – which tracks month-on-month changes in retail sales – registered 40.3, up only slightly from June’s 31-month low of 40.2 (any reading below 50 signals falling sales).
Among those businesses that recorded a decrease in sales, the most frequently cited reason was lower footfall. Measured on a year-on-year basis, sales fell at the fastest rate seen since December 2014.
Retail sales were generally below firms’ targets in July, which they put down to overly optimistic forecasts. The degree of underperformance was considerable, albeit the least marked since March. Retailers’ expectations for future performance also moved in negative territory in July, with more companies expecting actual sales to be lower than plans in the month ahead (almost 20%) than those predicting some degree of overachievement (5%).
Retailers continued to reduce their staffing numbers during July. That extended the current sequence of decline in employment to five months, with rate of job losses the fastest since September 2015.
Falling sales also weighed on retailers’ buying levels in July, with the value of goods bought for resale dropping for the ninth straight month. Although easing from June’s 18-month record, the rate of decline in purchasing activity remained marked and faster than the average recorded over the series history. Items for resale continued to accumulate at retailers during July, marking six straight months of inventory growth. However, having eased to the weakest in this sequence, the rate of expansion was only marginal.
Average purchase prices facing retailers rose in July, though the rate of inflation was the weakest recorded since November 2014. While there were some reports of a lack of availability of raw materials leading input prices to rise, supplier promotions acted to subdue overall cost pressures. Retailers’ gross margins were squeezed further, due to a combination of lower sales and discounting. The rate of decline was unchanged from the sharp pace seen in June.
Phil Smith, economist at Markit which compiles the Italian Retail PMI survey, said: “It seems the retail sector is in the midst of a renewed downturn. After falling to its lowest level for more than two-and-a-half years in June, the retail PMI signalled another steep monthly drop in sales at the start of the third quarter. The recent downturn has led retailers to pare back staff numbers, with July seeing an acceleration in job losses to the fastest since September last year. Another sharp decrease in gross margins in a relatively low-cost environment demonstrates how hard retailers are finding it to drum up sales.”