Italy’s retail sales activity declines further in May owing to unfavorable weather

Italy’s retail sales declined further in May. The seasonally adjusted Markit Italy PMI rose to 45.2 in May from April’s 14-month low of 42.6. The decline in retail sales throughout Italy is partially because of bad weather and lower football in May. However, the index signalled a slower pace of decline overall. Italy’s retail sales also declined on a year-on-year basis.

The degree of the drop in sales was sharp; however, it was less marked than in April, said Markit. On average, Italy’s actual sales were quite lower than the retailers’ previously-set targets. The extent of underperformance was the highest since February 2015. About 47% of businesses in Italy reported below planned sales.

However, retailers continue to be positive about the outlook in coming months in spite of the actual sales falling short of planned levels in May. Nevertheless, the upbeat view was at a five-month low. Decline in sales led to an additional rise in the value of goods for resale held in stock. Furthermore, the pace of accumulation rose from April’s moderate pace to the most rapid recorded in more than five years. Meanwhile, inventory levels increased in spite of additional decline in retailers’ spending on items for resale. This was the seventh straight rise.

Level of employment in Italy’s retail sector declined for the third straight month. The anecdotal evidence implied that this was majorly forced dismissals. However, the decline in staff numbers was just marginal, consistent with the recent trend.

The pace of purchase price inflation decelerated to modest rate in May. Meanwhile, the May data hinted at further reduction in gross operating margins of retailers, with the rate of contraction slightly altered from the pace recorded in April.