The FTSE 100 and European markets remained relatively unchanged on Thursday as consumer confidence in the British economy plummeted to a record low, fueled by growing recessionary concerns.
Table Content:
The British Retail Consortium’s (BRC) consumer sentiment monitor revealed a significant drop in economic expectations for the next three months, registering a reading of -34, down from -27 in December.
The survey indicated that only the 18-27 age group anticipates economic improvement, while a concerning two-thirds of those aged 60-78 expect a worsening economic situation.
This aligns with recent survey data highlighting widespread consumer belt-tightening, with the consumer sentiment index at a 12-month low and household financial outlook the bleakest since March 2024.
Helen Dickinson, BRC chief executive, attributed the decline in consumer confidence to the government’s warnings of impending economic hardship and the end of the Christmas spending period. She further emphasized the strain on retailers from a £7 billion increase in costs due to the recent budget and a new packaging levy, potentially leading to price hikes and job losses.
Global Market Overview and Investor Focus
Beyond the UK, investors remain keenly focused on the new Trump administration and its approach to trade tariffs.
Stock Market Performance:
- The FTSE 100 showed minimal movement in early trading.
- Germany’s DAX (^GDAXI) experienced a slight increase of 0.2%, while the CAC (^FCHI) in Paris edged up by 0.1%.
- The pan-European STOXX 600 (^STOXX) remained largely static, closing just below its late-September record high.
- Wall Street anticipated a subdued opening, with S&P 500 futures (ES=F), Dow futures (YM=F), and Nasdaq futures (NQ=F) all trading lower. Wednesday’s stock market gains were driven by robust earnings reports, boosting optimism about the economic outlook for the next few years.
The pound weakened against the US dollar (GBPUSD=X), depreciating by 0.1% to 1.2295.
Key Economic Events and Corporate Updates
Davos World Economic Forum:
The World Economic Forum in Davos entered its third day, featuring a packed schedule including:
- A special message from Pope Francis
- An address by Argentinian President Javier Milei
- Discussions on tariffs, antimicrobial resistance, and global risks
- A live video address by former US President Donald Trump
Primark Sales Forecast Downgraded:
Associated British Foods (ABF.L) lowered Primark’s sales forecasts, citing cautious consumer spending and unfavorable weather conditions in the UK. UK sales declined by 4% in the 16 weeks leading up to January 4th, with like-for-like sales down 6.4%. While December sales saw growth, the company now projects low single-digit sales growth for the brand in 2025, revised down from the mid-single-digit growth anticipated in November. Primark’s UK and Ireland markets contribute approximately 45% of its total sales. Gains in Spain, Portugal, France, Italy, and the US partially offset the weakness in the UK market.
Looking Ahead: Upcoming Economic Data and Events
Key economic indicators and events to watch include:
- US Initial Jobless Claims
- EU Consumer Confidence
- US New Home Sales
Conclusion: Economic Uncertainty and Consumer Sentiment Weigh on Markets
The sharp decline in UK consumer confidence underscores the prevailing economic uncertainty and anxieties surrounding a potential recession. Retailers face mounting pressures from rising costs and reduced consumer spending. While global markets remain relatively stable, investor attention remains fixed on political and economic developments that could significantly impact future market performance. Upcoming economic data releases will provide further insights into the health of both the UK and global economies.
