ICSC: Euro-Shop Index plummets in February (EU)

The International Council of Shopping Centers (ICSC) reported that its pan-European survey of shopping-center industry business conditions for February 2013 showed a sharp reversal of fortunes on the previous month. The survey results were compiled from responses of European shopping center executives collected between 14-28 February 2013.

Occupancy hit an all-time low and sentiment amongst shopping center management also deteriorated significantly. Sales and Footfall also fell.

Analysis of the annual trends reveals a parallel downturn in the performance in February 2012, though without additional historic annual data to draw upon ICSC cannot say for sure whether the latest figures can be attributed to an ongoing seasonal influence.

What is more indicative is that the dip in industry confidence coincides with the European Commission’s latest forecasts which predicts that the Eurozone economy will shrink by 0.3% in 2013—a U-turn on a previous forecast which estimated that the region would experience growth of 0.1% this year.

ICSC’s Euro-Shop Index, the survey’s summary index of current and future business conditions, tumbled to 36% in February, a 25 percentage point fall from the previous month and the lowest figure recorded since exactly 12 months ago when the index stood at 31%.

The Euro-Shop Current-Conditions Index, which measures the performance of four components (sales, footfall, occupancy and re-leasing rent), also suffered a sharp decline, moving from growth conditions of 58% in January back down to only 35% in February. This is the lowest figure since the index began in March 2011

All four industry indicators experienced a sudden acute fall in month-on-month performance, led by sales and footfall, which dropped by 32 and 29 percentage points to 31% and 38% respectively. This may, in part simply be a result of the time of year as wintery weather continues to prevail which is discouraging shoppers from purchasing retailers’ new spring season stock.

Occupancy hit a new all-time low of 35% in February, down from 50% in the prior month, and the re-leasing rent component also experienced a 15 percentage point fall, taking it down to 38%.

Sentiment for the next six months also deteriorated significantly in February with the Euro-Shop Expectations Index falling to 37% from 63% in the previous month. Despite this poor monthly performance, the index remains higher than it was a year ago when it slumped to its lowest figure of only 25%.

The European Commission said that it expected unemployment in the Eurozone to continue to rise in 2013 to over 12% as economic recession and austerity efforts to cut budget deficits continue to hit consumers.

Despite measures to tackle their overspending, governments are finding it difficult to bring their finances back under control, as exemplified by Spain which had a deficit of 10.2% of GDP in 2012 and is only expected to fall to 6.7% this year—still above the agreed target. The UK is also failing to reduce its deficit, which is expected to grow to 7.4% of GDP in 2013, up from 6.3% in 2012 and is the worst in the European Union.

In summary, last month’s positive figures proved to be a disappointing anomaly as both current conditions and expectations for the next six months plummeted back down into decline. Sales and footfall suffered the largest drop in performance—perhaps, in part, due to the time of year as the post-Christmas sales are over, yet the weather has not yet improved significantly enough to consider purchasing spring season stock.

The European Commission’s latest economic forecasts are a worrying read and it appears that until at least the fourth quarter of this year the majority of European retail markets will remain at the mercy of recession as national austerity measures continue to bite.

Source: Nicky Godding

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