Europe Sales Growth Accelerates, Bloomberg PMI Shows (Update4)
By Ben Sills
Dec. 6 (Bloomberg) -- Retail-sales growth accelerated in the euro region for a third month in November, giving the European Central Bank more scope to raise interest rates next year, the Bloomberg purchasing managers index showed.
An index of retail sales in the economy of the dozen nations sharing the euro rose to a seasonally adjusted 53.7, the highest in four months, from 52.8 in October, a survey of more than 1,000 retail executives compiled for Bloomberg LP by NTC Economics Ltd. showed today. A level above 50 indicates growth.
The ECB has already signaled that it will raise its key rate tomorrow for the sixth time in a year as consumer spending helps drive economic growth to the fastest pace in six years, increasing inflation pressures. Retailers such as KarstadtQuelle AG, Germany's biggest department-store company, and Acqua & Sapone SpA, an Italian beauty-products chain, saw sales increase as rising employment persuaded consumers to increase their spending.
``This is a trend we expect to see continue over the next few months,'' Jonathan Loynes, chief European economist at Capital Economics in London, said. ``The ECB will raise again in the first half of next year.''
Rate Increase
Bonds fell and investors increased bets on a further interest-rate increase next year. The yield on the two-year German government note gained 2 basis points to 3.67 percent at 12:58 a.m. Frankfurt time. The yield on June interest-rate futures gained 2 basis points to 3.83 percent. They settle to the three-month inter-bank offered rate for the euro, which has averaged 16 basis points more than the ECB benchmark rate since the currency's start in 1999.
The European Commission said Nov. 30 the euro area will start 2007 stronger than previously anticipated. Growth will accelerate to about 0.6 percent in the first two quarters of next year from 0.5 percent in the third and fourth quarters of 2006, the commission forecast.
Companies may become increasingly reliant on stronger domestic spending with a global slowdown clouding the outlook for exports. German factory orders unexpectedly declined for a second month in October, led by a slump in demand for cars and trucks, the Economy and Technology Ministry in Berlin said today.
Construction Output
Construction activity in the euro region increased its annual pace of expansion for a third straight quarter, the European Union statistics office said today. Output increased 3.9 percent in the third quarter from the year-earlier period after a 3.5 percent increase in the prior three months.
A non-seasonally adjusted sales gauge showed the biggest year-on-year increase since the purchasing managers survey began almost three years ago, rising to 57 in November, compared with 55.5 in October. Employment in retailing increased for an eighth month with the index rising to 50.9 from 50.6.
``We've been constantly growing, constantly increasing sales, and I don't see a particular reason for that to stop in the new year,'' said Maurizio Costantini, director of the Chieti, Italy, outlet of Acqua & Sapone, which sells soaps and beauty products at 400 branches. Sales rose 15 percent at his store from a year ago, Costantini said.
German retailers saw the biggest improvement in November, with the main index rising to 57.7 from 53.8 in October. Germany's unemployment rate fell to a four-year low of 10.2 percent in November while business confidence rose to match a 15-year high.
Spectacle Wearers
Fielmann AG, which says it has sold frames to more than half of Germany's spectacle wearers, increased profit 17 percent in the third quarter as new store openings added to revenue. The company is headed for ``an unusually large profit'' this year, Chief Financial Officer Georg Zeiss said Nov. 23.
``For the first time since many, many years, we're seeing sales growth at Karstadt,'' Thomas Middelhoff, chief executive officer of KarstadtQuelle, said in a Nov. 17 television interview. ``We're very optimistic. I'm happy to say that the momentum is continuing.''
Still, German retailers expect sales to decline next year when the government raises sales tax to 19 percent from 16 percent, the HDE store owners' association said Nov. 30. Indeed, part of the gain in November may be due to consumers bringing forward the purchase of more expensive items ahead of the tax increase set for Jan. 1.
`Christmas Boom'
``There will be a Christmas boom and not much more,'' said Elke Speidel-Walz, senior investment strategist at Deutsche Bank AG in Frankfurt. ``The higher employment we've had in Germany is now based on temporary workers.''
Sales growth slowed in France, where the economy failed to grow in the third quarter, with the index reading 53.5, compared with 55.7 in October. Sales contracted in Italy with the index reading 48 after 47.4 in October.
For the Bloomberg retail indicator, NTC recruited a representative panel of retail companies in Germany, France and Italy, which together make up 80 percent of total euro-region retail sales by value. The panel includes large chain retailers as well as smaller stores.
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