Retail sales fell last month as households cut back on food purchases in response to cost-of-living pressures.
The Office for National Statistics reported a 0.5% drop in sales volumes for May, with the previous month’s 1.4% growth revised to 0.4%.
The update came as June’s consumer confidence barometer from GfK hit a record low of minus 41 as price rises outpace wages.
FTSE 100 Live Friday
Retail sales fall as food shoppers cut back
Consumer confidence at record low
FTSE 100 in strong end to week
Alan Miller of SCM Direct on the investment myth....
11:07 , Simon English
For decades, UK retail investors have been sold a myth. The UK Investment Industry have woven the tale that higher fees for active management gets you higher performance, especially when times get tough, compared to passive / index managers. When markets get tough, they can switch into cash or more defensive shares to protect your hard-earned savings. Back in 2020, the CEO of Schroderssaid that the weakness of index funds would be revealed in any downturn as “The shortcomings of mechanised trading, better known as passive trading, will come into sharper focus”.
Star City funds fall to earth
10:48 , Simon English
Research for the Evening Standard shows that of the 18 fund categories set up by the Investment Association – everything from Global Emerging Markets to Europe to America to Japan – all bar one are below their benchmark.
All aside from Latin America have lost money since last year.
Big names who are well behind the market include Terry Smith, Nick Train and Stephen Yiu.
Between them, they manage billions of pounds on behalf of many thousands of investors, some of whom are relying on the funds for their retirement.
The funds take higher charges than simple index trackers on the expectation they will beat the stock market. Lately, they are doing worse, in some cases far worse, than markets that are also well down as global recession fears mount.
FTSE 100 higher, turbulence continues for airlines
10:22 , Graeme Evans
The pandemic recovery for airline stocks appears as far off as ever after a City bank today forecast a difficult 2023.
Deutsche Bank said it was “hard to make a positive case for airlines”, given that an economic downturn will make it much tougher to pass on cost pressures.
Its warning is yet another setback for investors, many of whom piled into the sector after the initial pandemic sell-off. Instead, the industry has been the last to recover following blows ranging from Omicron to this summer’s wave of cancellations.
Industrial action also looms after British Airways workers at Heathrow voted to strike during the summer holidays. Shares in BA owner IAG are down 40% in the past year, with easyJet off more than 50% after this week’s warning of a £200 million bill for ditching flights.
Deutsche Bank downgraded its price targets on IAG and easyjet to 140p and 490p respectively, with Wizz Air now at 2,350p. Ryanair is its only “buy” recommendation, but the Dublin-based carrier also got the price downgrade treatment today.
The bank said: “The sector is left looking expensive on 2023 earnings, as the post-Covid recovery suffers a delay, but a more constructive view can still be taken looking at 2024.”
IAG shares fell 0.7p to 113.6p and easyjet dropped 9.6p to 388.9p in a session when the rest of the London market traded higher.
The FTSE 100 index stood 72.59 points higher at 7093.04, having benefited from Thursday’s strong session on Wall Street and a positive performance by Asia markets.
Big risers included Scottish Mortgage Investment Trust and safety technology conglomerate Halma after gains of more than 3%.
Consumer-focused stocks were under pressure after today’s retail sales release showed a 0.5% drop in volumes alongside a downgrade to April’s figure from 1.4% to 0.4%. Next fell 30p to 5848p and Ocado dropped 1.4p to 854p.
The FTSE 250 index rose 204.12 points to 18,897.10, led by a rise of 13% for Ultra Electronics after its takeover by Cobham got the green light from the UK government.
FTSE 100 higher, Next shares lower
08:47 , Graeme Evans
The FTSE 100 is up 33.76 points at 7054.21, having benefited from Thursday’s strong session on Wall Street and positive performance by Asia markets.
Safety technology conglomerate Halma is at the top of the risers board with a gain of 2%, with Spirax-Sarco Engineering not far behind.
Consumer-focused stocks were lower after today’s official retail sales release showed a 0.5% drop in volumes for May and a downgrade to April’s figure from 1.4% to 0.4%. Next fell 96p to 5782p and JD Sports Fashion dropped 1.65p to 112.55p.
The FTSE 250 index rose 86.40 points to 18,779.38, led by a rise of 13% for Ultra Electronics after its takeover by Cobham got the green light from the UK government.
Food spending slows as prices rise
08:06 , Graeme Evans
Weaker food spending drove today’s drop in 0.5% retail sales volumes as budget-conscious shoppers cut back on purchases amid higher prices.
Sales in non-food stores were unchanged, reflecting a 2.2% rise in clothing ahead of the summer season and offset by a drop in household goods.
The amount spent by shoppers lifted 0.6% in the month and by 5% in a year but with inflation at 9.1% there’s clear evidence that households are cutting back.
Hargreaves Lansdown personal finance analyst Sarah Coles said: “Over the coming months, we can expect to see more weakness spread throughout the sector.
“It’s not just the rising bills of today that are worrying us, it’s the prospect of even higher bills tomorrow, and fears of a looming recession.”
Consumer confidence at record low
07:48 , Graeme Evans
GfK’s consumer confidence barometer recorded a headline score of -41 for June, a record low for the second successive month as prices continue to outpace wage growth.
The separate results covering personal finances and the wider UK economic picture all dropped and the measure on major purchase intentions was unchanged.
GfK’s client strategy director Joe Staton said: “The consumer mood is currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there’s talk of a looming recession.
“One thing is for sure, Britain faces a stark new economic reality and history shows that consumers will not hesitate to retrench and tighten their purse strings when the going gets tough.”
FTSE 100 higher after Wall Street rally
07:37 , Graeme Evans
Last night’s fightback by US markets means the FTSE 100 index is finishing the week on the front foot, with CMC Markets forecasting a rise of 50 points to 7070.
As investors navigate a path between higher rates and recession risk, the Dow Jones Industrial Average climbed 0.6% on Thursday and is up 2.6% so far this week following three consecutive weekly declines.
The gains came despite Federal Reserve chairman Jerome Powell warning that a US recession was a possibility as the central bank focuses on getting inflation back under control through tighter monetary policy.
Asia markets followed Wall Street’s lead as Hong Kong’s Hang Seng lifted 1.2% and Tokyo’s Nikkei improved 0.7%, aided by speculation over further policy support for China’s economy.