Economy Roars in July

Monday, 10 September: Despite murmuring trade tensions and emerging debt fears the FTSE managed to open the week with modest gains before these were slowly eroded during the session, ending in the index closing more or less unmoved on the day (+0.02%). Shortly after the open UK data released showed the positive effect this summer’s weather had on consumer spending and construction, with accelerated growth in July. The economy grew 0.3% during July and 0.6% in the 3 months to July. Industrial output contracted but services and retail both performed well. Of course, we would be harsh to not credit a little bit towards the World Cup run, which certainly boosted sales in a few areas such as alcohol, Harry Maguire posters and premature winners tattoos.

One headwind for the FTSE was the rally from the pound, after the EU’s chief Brexit negotiator Michel Barnier thinks a deal with the UK is realistic and possible within the next 8 weeks. After so long you get the feeling everyone I snow rushing around panicking like a university library in the last week of the semester, but better late than never.

Despite retail sales climbing in July, this is certainly a one-off boost as there is no dis-illusion to the continued woes on our high-streets. Debenhams, whom have struggled for years now where in the headlines today after it was reported they had sought the help of KPMG in order to help formulate a turnaround plan to secure the future of the store. Shares declined 17% earlier on but managed to recover some of this to close 10% lower. Many are expecting a CVA deal or possible tie-up with House of Fraser as the only two remaining realistic routes. Today’s further profit warning hasn’t helped investors and with such a tough trading environment it is certainly a critical moment in the store’s history.

Some other main market headlines today included Primark’s owner, Associated British Foods, backing full year guidance after seeing Primark sales climb 5.5%. Shares fell as they posted a negative outlook for their sugar division, despite the fact Primark is the vital arm to the business now. Turnaround specialist Melrose was the biggest faller on the FTSE, with shares down over 4% as LSE group sat at the top.

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