By Sober Look
The French group, posting a 0.1 percent drop in underlying first-quarter sales, said it was hit by continued weakness in its core French hypermarkets and in austerity-hit Southern Europe, where shoppers cut back on purchases of discretionary non-food items.
This problem is not unique to Carrefour. The Eurozone is experiencing a sharp contraction in the retail sector.
The purchasing managers’ index (PMI) for the three countries, compiled by research firm Markit, fell to 41.3 in April, down from 49.1 in March and the weakest reading since November 2008.
A reading below 50 indicates shrinking activity.
The chart below shows the Retail Purchasing Managers Index (Retail PMI) for the Eurozone, a leading indicator for the official retail sales numbers.
Eurozone Retail PMI (source: Markit Partners)
Here is a quote from Trevor Balchin, the author of the Eurozone Retail PMI:
Trevor Balchin (Markit Partners): – “The latest batch of retail PMI data for the Eurozone portrayed a worryingly steep downturn on the high street. Coming on the back of disappointing flash estimates for the manufacturing and service sectors, the retail data point to a deepening recession at the start of the second quarter. The April Retail PMI signalled the fastest fall in sales since the record contraction seen in late-2008."
This decline however is not limited to the Erozone periphery. In fact the French Retail PMI is now below the 2008/09 levels – at record lows. Some of this can be attributed to the uncertainty around the French elections. Nevertheless this squeeze on the French retailers is bound to pressure the French GDP.
French Retail PMI (source: Markit Partners)
Jack Kennedy, author of the France Retail PMI, had this to say:
Jack Kennedy (Markit Partners): – “The latest PMI figures point to a dismal month for French retailers in April. Although survey respondents indicated that weakness was partly attributable to uncertainty surrounding the presidential elections, the fragile economy is also clearly a large factor weighing on consumer spending. Retailers will be hoping for something of a rebound once the elections are over, but the sector still looks likely to be a drag on second quarter GDP.”
Mario Draghi’s "signs of stabilization" statement is coming back to haunt the central bank. Another rate cut from the ECB, though largely symbolic in nature, is coming shortly.