According to the Bloomberg Purchase Managers Index accelerating inflation coupled with high interest rates and fears over borrowing in the Euro Zone has helped to dull consumer spending. The index, which questioned 1,000 executives in 13 countries that have the euro as common currency, showed that spending is continuing to decline, registering an overall index of 46. Any figure below the 50 mark on the index is considered to represent a decline in consumer spend. This figure follows on from a weak November when it registered 45.9. NTC Economics, which compiles the PMI for Bloomberg, said that retailers in Europe's biggest economy, Germany, reported the slowest sales, with an index of 44 for December, while Italy registered 44.7. The Euro Zone's other leading economy, France, reported the best figure, with a PMI of 49.1, a figure that had rebounded after the national transport strikes that slowed the economy during November. Financial experts point to the fact that oil prices, which yesterday went beyond the $100 dollar a barrel mark, are continuing to edge up inflation, which in turn is forcing households to tighten budgets. Despite record employment figures in the Euro Zone, the region is facing up to low consumer spend caused by inflationary pressures, a factor that comes at a particularly crucial time for the personal care industry. Increased prices were particularly hard on foods, which make up a considerable part of the Christmas spend. Analysts believe that this will translate into lower spend on non-essential personal care items, particularly luxury products. The holiday season is traditionally a time when consumers increase their spend on personal care products, splashing out more both on gifts and on themselves. This effect is even more pronounced for luxury beauty providers, as products such as expensive fragrances, anti-aging creams and make-up are often bought in gift sets as presents. Indeed some fragrance makers claim that half of their yearly sales are achieved in the build up to Christmas, helping to cap off a global industry currently valued at €21bn.
The Christmas period is undoubtedly the most important time for luxury cosmetic players but early reports from retailers and market experts indicate that sales have been slack in the Euro Zone.