Retail Index: Signs of recovery in European retail markets
European retail markets have largely absorbed the direct and indirect impacts of the price increases that are being driven by shortages of raw materials and higher energy costs and amplified by the ongoing war in Ukraine. A positive trend was observed in 6 of the 15 EU countries in the Global Retail Attractiveness Index (GRAI), compared to the first quarter of 2022. In the other markets, losses were moderate apart from a few exceptions in the Nordics. “Positive trends across European labour markets and retail sales that have been improving for some time in all 15 countries indicate recovery and a likely return to pre-pandemic levels in these markets,” said Olaf Janßen, Head of Property Research at Union Investment.
At 111 points, the retail index for Europe (EU 15), compiled by Union Investment and GfK, remained unchanged in the first quarter of 2023 compared to the corresponding prior-year period. At the same time, however, there was an increase in the discrepancy first identified last autumn between highly negative sentiment among consumers and retailers on the one hand and positive labour market data and inflation-driven sales on the other. Consumer sentiment (78 points) dropped sharply by 14 points, while retail sentiment (95 points) was down 12 points. However, the labour market rating (136 points, plus 9) and retail sales (133 points, plus 10) both improved.
In the EU-15 index, the biggest increases compared to Q1 2022 were seen in Italy, which climbed 7 points, and Poland, which added 6 points. Topping the country ranking were Poland (127 points) and the Czech Republic (122 points), followed by Portugal (116 points) and Germany (115 points). Next came France and Italy with 113 points each. The worst performers in Europe at the end of the first quarter of 2023 were Sweden and Denmark, with 83 and 86 points. The two Nordic countries also suffered the heaviest losses compared to the previous year, declining by 12 and 17 points respectively.
While the EU-15 index remained steady, there were still no signs of recovery in North America and Asia. The GRAI North America index declined the most (minus 8 points) compared to Europe and stood at just 95 points. With slightly smaller losses (minus 7 points), the retail index in Asia-Pacific was once again the worst performer (91 points). The biggest losses in the two non-European indices at the end of Q1 2023 were recorded in South Korea (93 points, minus 16) and – again – in Canada (87 points, minus 18).
Union Investment’s Global Retail Attractiveness Index (GRAI) measures the attractiveness of retail markets across a total of 20 countries in Europe, North America and the Asia-Pacific region. An index value of 100 points represents average performance. The EU-15 index combines the indexes for the following EU countries, weighted according to their respective population size: Sweden, Finland, Denmark, Germany, France, Italy, Spain, Austria, the Netherlands, Belgium, Ireland, Portugal, Poland and the Czech Republic, plus the United Kingdom. The North America index comprises the US and Canada, while the Asia-Pacific index covers Japan, South Korea and Australia.
Compiled every six months by market research company GfK, the Global Retail Attractiveness Index consists of two sentiment indicators and two data-based indicators. All four factors are weighted equally in the index, at 25 per cent each. The index reflects consumer confidence as well as business retail confidence. As quantitative input factors, the GRAI incorporates changes in the unemployment rate and retail sales performance (rolling 12 months). After standardisation and transformation, each input factor has an average value of 100 points and a possible value range of 0 to 200 points. The index is based on the latest data from GfK, the European Commission, the OECD, Trading Economics, Eurostat and the respective national statistical offices. The changes indicated refer to the corresponding prior-year period (Q1 2022).