FTSE 100 falls as investors brace for economic updates

The FTSE 100 has tumble this morning as investors digest a crucial set of economic indicators.

The Office for National Statistics reported retail sales jumped 13.9% in June, the biggest increase since records began since 1996, aided by a boom in sales of DIY products, although clothing sales have struggled. The rise is a step up from the 12% jump witnessed in May and, crucially, the ONS said sales volumes were around pre-pandemic levels.

The healthy uplift came as non-essential retailers were allowed to reopen stores on June 15, and large queues of shoppers were seen outside various chains, including Primark and Sports Direct.

However, the overall picture remains grim for the High Street, where many retailers were already struggling with the shift of consumers online before the pandemic forced most stores to close.

Many in the industry believe that lots of shoppers have switched to online for categories – such as grocery and fashion – that they had never shopped digitally for before, and may not switch back. Online spending also helped fuel the figures, although the figure dropped to 31.8% in June compared with 33.3% in May.

Meanwhile the latest flash PMIs for manufacturing and the services sector in July are due at 9.30am.

Meanwhile, data for the powerhouse services sector is expected to improve from 47.1 last month to 51.5, meaning the industry is back in growth. Manufacturing figures for July are expected to hit 52.0, up from 50.1 and economists will be keen to see any signs of a v-shaped recovery.

CMC Markets analyst Michael Hewson said of the retail sales figures: “Hopes are high that we can see another big gain after the 12% gain seen in May. Expectations are for a rise of 8.3%, in light of a similar strong recovery in the recent British retail consortium sales numbers, which showed the best recovery in over two years with a like for like gain of 10.9%, largely driven by a rise in supermarket sales as well as a big increase in online spending.

“The fading effects of the total lockdown as well as various shops reopening in mid-June, are expected to have prompted a similar rebound in the ONS numbers. The hope is that these two months will unleash a strong reaction of suppressed demand after the 18.1% decline seen in April. A strong number in June will also go some way reverse more of the -23.2% combined two-month decline seen in March and April.”

The FTSE 100 opened down 75 points, or more than 1%, lower at 6136 with markets in Europe stumbling.

In corporate news, telecoms giant Vodafone and chocolate retailer Hotel Chocolat have trading updates, while British Gas owner Centrica’s half-year results should give detail on how Britain’s energy usage has changed as workers largely operate from home.