More signs of the cost of living crunch cooling the UK economy weighed on market sentiment in London during opening exchanges today.
The capital’s premier FTSE 100 index dropped 0.39 per cent to 7,484.35 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, tumbled 1.47 per cent to below 20,000 points.
Investor concerns about a slowdown in UK growth were stoked again today after a string of fresh data indicated households are cutting spending in response to rising living costs.
The latest purchasing managers’ index from S&P Global, covering May, collapsed to a 15-month low, driven by activity in the services sector cascading.
Household finances are being squeezed by rising food and energy bills, leaving less room to maintain normal discretionary spending levels.
The UK relies on household spending to generate around two thirds of output.
Separate data published by the Office for National Statistics showed tax receipts in April came in below Britain’s official forecaster’s expectations, suggesting households and business activity is cooling.
Experts have warned historically high inflation – currently running at a 40-year high of nine per cent – will tip the UK into a recession if it triggers a sharp pull back in household spending, clouding the outlook for stocks.
Energy giant SSE was among the biggest fallers on the FTSE 100, losing 7.85 per cent. Broadcaster ITV closely followed, shedding 4.87 per cent.
FTSE 250-listed energy firm Drax Group suffered heavy losses, falling over 13 per cent.