UK retail sales rebound in warm May as consumer confidence improves – business live

Over in the eurozone, the economic recovery has suffered a setback this month as firms report a drop in new business.

The latest survey of eurozone purchasing managers has found that new orders decreased for the first time in four months in June, leading to slower rises in business activity and employment levels.

Worryingly, business confidence dipped to the lowest since February.

This has pulled the HCOB Flash Eurozone Composite PMI Output Index down to 50.8 points this month, a three-month low, down from May’s 52.2. Any reading over 50 shows growth.

The manufacturing sector fell into a deeper contraction this month, while service sector growth slowed.

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says:

“Is the recovery in the manufacturing sector ending before it began?

Both we and the market consensus anticipated that the increase in the index in May would be followed by another rise in June, potentially setting the stage for an upward trend. However, rather than moving closer to expansionary territory, the HCOB Flash Eurozone Manufacturing PMI reading fell, dashing hopes for a recovery.

This setback was compounded by the fact that new orders, which typically serve as a good indicator of near-term activity, fell at a much faster rate than in May. This rapid decline in new orders suggests that a recovery may be further off than initially expected

Newsflash: soft drinks maker Britvic has rejected two takeover approaches from Danish brewer Carlsberg.

Britvic has turned down an offer of £12.50 pence per share this week, which would value it at £3.1bn, having already rejected an initial proposal of £12 from Carlsberg earlier this month

Britvic told the City this morning:

The Board together with its advisers carefully considered the Second Proposal, and concluded that it significantly undervalues Britvic, and its current and future prospects. Accordingly, the Board unanimously rejected the Second Proposal on 17 June 2024.

Shares in Britvic have jumped by 15% this morning, to £11.69.

Carlsberg has confirmed it has made two approaches, and points out that the £12.50/share offer is a 29% premium to Britvic’s closing share price on Wednesday.

Carlsberg says it is considering its position, and says:

Carlsberg believes that the Proposal represents a compelling opportunity for Britvic shareholders to realise their investment in full in cash at an attractive valuation.

Could the jump in clothes shopping last month have anything to do with Taylor Swift’s Eras Tour, which began this month and runs until August?

Kathleen Brooks, research director at XTB, suspects Swifties have been snapping up new outfits ready for the concerts.

She writes:

UK retail sales surged last month, and core retail sales that exclude auto fuel rose at a 1.2% annualized pace in May, after falling by 2.5% in April. The ONS said that sales rebounded after a wet April, and sales volumes grew across most sectors, with clothing and furniture sales rebounding strongly.

Could this be the Taylor Swift effect, with people (including myself) splurging on new outfits ahead of her era’s tour, the UK leg of which is set to add £1 billion to the UK economy?

There is no denying that today’s retail sales report paints a positive picture for the UK consumer, Brooke adds:

Non -food store sales rose by 3.5% in May, the highest level since April 2021, and online sales surged by 5.9%, the highest monthly increase since April 2022.

The ONS did caveat the boost to sales compared to a year ago, by reminding us that last May there was an extra bank holiday for the King’s Coronation. However, after a slump at the end of spring, the consumer looks to be back as the UK finally moves towards summer.

The latest public finances data shows that the UK’s net debt as a percentage of GDP remains at levels last seen in the early 1960s.

The ONS reported this morning that public sector net debt excluding public sector banks was provisionally estimated at 99.8% of gross domestic product (GDP) at the end of May.

That’s 3.7 percentage points higher than a year ago.

In historic terms, it’s a level last seen in 1961, when Harold Macmillan was prime minister and the UK was paying off the debt incurred in the second world war.

As flagged in the introduction, the UK borrowed another £15bn in May. Although that’s £800m more than a year ago, it’s £600m lower than forecast by the Office for Budget Responsibility.

British consumer sentiment has risen to a two-and-a-half year high this month, market research company GfK reports this morning.

The GfK consumer confidence survey has risen to -14 in June, up from from May’s -17, the highest reading since November 2021.

That may well have fed through to the increased retail sales spending last month.

The survey found that households have a more optimistic view of the economic situation over the last 12 months, and the outlook for the next year.

However, people grew gloomier about their own personal finances, highlighting that times are tough even though inflation has fallen back to 2%.

Joe Staton, client strategy director at GfK, explains:

Those measures on the economy registered sharp increases of seven points and six points respectively, and there was a welcome three-point boost in intentions to make major purchases.

While June’s reading of -14 is the third month in a row that confidence has increased, the headline score remains negative owing to the difficulties so many have experienced as the unrelenting cost-of-living crisis batters household budgets.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Today we will be digesting the final slug of significant economic data ahead of the UK general election, which have just been released.

The latest retail sales figures show that consumer spending picked up last month, while new borrowing statistics are casting a light on the public finances.

May’s retail sales stats show that sales volumes rebounded in May, after a slump in April when bad weather drove shoppers from the high street. That’s rather stronger than the 1.5% rise forecast by City economists.

Retail sales volumes jumped by 2.9% in May 2024, following a fall of 1.8% in April, the Office for National Statistics reports.

The ONS says:

Sales volumes rose across most sectors, with clothing retailers and furniture stores rebounding following poor weather in April.

Last month was the warmest May on record, in a series going back to 1884, according to the Met Office.

More broadly, sales volumes rose by 1.0% in the three months to May 2024 when compared with the previous three months, the ONS adds.

Retail sales volumes rose across all main sectors, the ONS says.

The biggest growth was seen among “non-store retailers”, such as online shops, where volumes jumped by 5.9% on the month.

At department stores, clothing outlets, household goods sellers, and other non-food stores, volumes rose by 3.5% in May.

These increases suggest people feel more confident about economic conditions – as shown by the latest poll of consumer confidence from GfK. But while that may bolster Rishi Sunak’s claim that the economy is turning the corner, this isn’t providing the PM with a poll boost….

The public finances, meanwhile, show that the UK borrowed £15bn in May to cover the difference between governent spending and income. That’s a little lower than forecast, but £800m more than in May 2023.

It’s the third highest May borrowing since monthly records began in 1993.

The agenda

• 7am BST: UK public finances for May

• 7am BST: UK retail sales for May

• 9am BST: Eurozone flash PMI survey for June

• 9.30am BST: Eurozone flash PMI survey for June

• 2.45pm BST: US flash PMI survey for June

• 3pm BST: US existing home sales for May