European retail sales fell in March as rising fuel, utility and food prices left shoppers with less money to spend, the Bloomberg purchasing managers index showed. The gauge of sales growth in the euro region declined to a seasonally adjusted 48.2 from 52.4 in February. A reading below 50 indicates contraction. Sales also fell from 2007, according to the index, which is based on a survey of more than 1,000 executives compiled for Bloomberg News by NTC Economics Ltd.
Italy was again the worst performing nation, with retail sales falling for the thirteenth consecutive and at the steepest rate in the survey history (the index slumped from 43.8 to a low of 36.4). Uncertainty regarding the current political situation was put forward by a number of retailers as being a possible cause of lower sales during the month.
In France, retail sales rose for the third month running, with the increase supported primarily by higher food & drink sales values. The rate of growth was weaker than the previous two months (the index slipped from 58.8 in February to 53.3), but nonetheless remained robust and in marked contrast to the contraction seen throughout Q4 of last year.
German retailers, meanwhile, saw a modest rise in sales for the second successive month, but the rate of increase was down slightly on the six-month high seen in February and weaker than that posted in France (the index fell from 52.1 to 51.5). Strong growth of sales in the food& drink sector sustained the overall index above 50.0.
Europe's economy is heading for its weakest growth in at least three years as rising credit costs and a U.S. slowdown squeeze companies and consumers. With inflation accelerating to its fastest rate in 14 years and salaries not showing exceptional growth, households may well further scale back purchases of clothing, electronics and cars etc.
European consumer confidence remained at the lowest in more than two years in February, according to the European Commission. Inflation in the euro area was 3.2 percent in February, the fastest since 1993, boosted by soaring food and energy prices. Crude oil has risen 30 percent to more than $100 in the last six months.
The European Commission and the European Central Bank have both cut their economic growth forecasts for 2008 in the past month, predicting the economy will expand by the slowest since 2005. The European Forecasting Network, a group of economic institutes, yesterday predicted a growth rate of 1.4 percent, the lowest since 2003.