European retail sales recovering

The Purchasing Managers Index (PMI) shows that European retail sales have risen for the first time in three months as sales in clothing and food are on the up.

Despite the positive PMI reading, the consumer outlook is very gloomy as inflation is still high in a period of slow economic growth and rising prices.

Sales increased in both Germany and France, as the German index rose to 56.6 from 44.6, whilst in France it went to 59.6 from 46.2, its highest level for almost two years.

The outlook for euro-zone retailers and the labour market has helped the situation as European households do not have the same level of debt as those in the UK and the US.

There is the fear that recovery may be short lived, although the main focus is that unemployment must remain strong in order for retail sales to continue to climb. However if companies are cutting back on jobs, and the labour market bubble bursts, retail sales will be hurt no end.

So far, the strong Euro has made European goods less competitive abroad and sales continue to slow, although the recent Euro-Zone current account has fallen six billion.

As rising raw materials and oil costs have eroded, profits coupled with the fact that the domestic market are being hit by inflation and uncertainty.

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