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What to watch: 'Promising' UK retail sales, weak GDP and DFS woes

Tom Belger
Finance and policy reporter
UK shops have seen a 'promising' rise in sales, but revenue remains significantly down on pre-crisis levels. Photo: Frank Augstein/AP

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Biggest jump in UK retail sales in two years as Ocado surges

UK retailers saw their biggest jump in sales in two years in June, as more shops were allowed to reopen their doors.

New figures from the British Retail Consortium (BRC) and consultancy KPMG showed sales rising by 3.4%, marking the first month of growth since the lockdown began in March. It comes after average declines of 6.4% in each of the past three months.

But the BRC called for further government measures to revive demand and help firms with rent costs, warning thousands of jobs are at risk. Much of the growth was in online sales, with high streets still struggling to draw back shoppers amid continued social distancing and virus fears.

READ MORE: Ocado revenues surge 27% as it says online shift ‘permanent’

“Though a month of growth is welcome news, retail is not out of the woods yet,” said BRC chief executive Helen Dickinson.

Meanwhile revenues at online retail delivery firm Ocado (OCDO.L) surged by 27% in the six months to May. The delivery juggernaut said that it was able to meet the “unprecedented, and sustained” demand for online food delivery during the lockdown, which it said had led to “a permanent redrawing of the landscape of the grocery industry worldwide.”

UK GDP comes in much lower than expected in May

The UK economy grew by just 1.8% in May as the country’s businesses began to reopen, signalling a slower-than-expected recovery from the depths of the coronavirus crisis.

While the month-on-month growth in gross domestic product (GDP) was markedly higher than the 20.4% collapse seen in April, it came in well below analyst forecasts of 5.5%, according to the Office for National Statistics (ONS).

Because April’s record decline followed a 5.8% contraction in March, the UK economy was still 24.5% smaller in May than it was before the onset of the crisis.

In the three months to May, UK economic output fell by 19.1% — almost one-fifth — with the ONS noting that government coronavirus restrictions had “dramatically reduced economic activity” during the period.

DFS sales fall by £270m due to lockdown

Sales at sofa retailer DFS (DFS.L) fell by £270m ($338m) due to the strict UK lockdown introduced in March, the company said on Tuesday.

DFS said revenues in the 52 weeks to 28 June were £271m lower than the prior 12 months, blaming the COVID-19 lockdown. Total sales were £725m in the period. It was forced to pause deliveries in March due to restrictions introduced by the government and the company furloughed 5,000 members of staff.

The sales slump means DFS expects to make a loss of £56m to £58m for its financial year, excluding restructuring costs.

Stocks slide on death toll warning, US-China tensions and California lockdown

European stocks slid on Tuesday morning, as a flare-up in US-China tensions, new lockdown rules in California and a coronavirus second wave warning in the UK spooked investors.

The pan-European STOXX 600 index (^STOXX) and France’s CAC 40 (^FCHI) slid by 1.5% on the open, while Germany’s DAX (^GDAXI) dropped by 1.4%. Britain’s FTSE 100 (^FTSE) declined by 0.8% after two days of gains.

Shanghai’s SSE Composite Index (^SSEC) closed down 0.8% on Tuesday, while Hong Kong’s Hang Seng Index (^HSI) lost 1.6% as it increased lockdown curbs to stem a rise in cases. Japan’s Nikkei 225 (^N225) shed 0.9%.

What to expect in the US

Futures were pointing to a higher open for US stocks on Friday. S&P 500 futures (ES=F), Dow Jones Industrial Average futures (YM=F) and Nasdaq futures (NQ=F) were all trading around 0.4% higher at around 4am eastern time in the US.