Introduction: Retail sales fall despite World Cup and hot weather boosting drinks trade
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Retail sales fell in July after a bumper period the previous month, despite the World Cup luring and the hot weather boosting alcoholic drink sales in supermarkets.
The total volume of goods sold in stores and online fell 0.5% in July, according to the Office for National Statistics (ONS), compared with a 1% rise in June.
The drop was partly down to non-food sales dropping back in July, after British retailers had brought promotions forward to June because of the hot weather. The ONS said there was “evidence of reduced promotions in July” among household goods and clothing retailers.
But shops selling alcoholic drinks and beverages “performed well, which they attributed to promotions, the hot weather, and the World Cup,” it said.
ONS chief economist Grant Fitzner said:
Retail sales increased in the latest three months, with all main sectors, apart from motor fuel, seeing growth.
Some retailers told us that hot weather and promotions helped sales of outdoor products and items such as fans, with clothing and online sports merchandise also doing well.
The figures come after UK consumer confidence jumped to a two-year high last month, according to a closely followed monitor. That is despite tensions in Iran flaring up again and a jump in energy bills last month making a dent in consumer finances.
GfK’s Consumer Confidence Index rose to -14 from -17 in July, but with inflation rising again and ongoing uncertainty in the Middle East, “there are still many challenges ahead that will test the mettle of UK consumers,” said Neil Bellamy, consumer insights director at GfK.
Elsewhere, oil prices were at one-month highs amid the ongoing deadlock between the US and Iran. Brent crude was at $93.42 a barrel, 0.38% down for the day but still trading higher than at the start of the week.
Asian share indices were mixed on Friday as stress in global bond markets showed little sign of abating. Japan’s Nikkei index was down 0.53%, although South Korea’s Kospi was up 0.87% and Hong Kong’s Hang Seng was up 0.92%.
The agenda
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7am BST: ONS retail sales data
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7am BST: ONS public finances
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9am BST: Flash PMI eurozone
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9.30am BST: UK flash PMI
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2.45pm BST: US flash PMI
Key events
Gold has rallied to a three-month high – and like bitcoin (see earlier post) it is partly down to weakness in the US dollar and a selloff in bond markets.
The safe haven asset had climbed 1.31% this afternoon to $4,575, having reached $4,601 earlier in the day – its highest since 15 May.
It comes after government borrowing costs around the world surged to the highest levels in decades amid growing fears over US bond market turmoil.
Anxiety about Donald Trump’s handling of the economy, and concern that his war with Iran is driving up inflation, have sparked a sell-off in the US bond market.
US Treasury Secretary Scott Bessent signalled on Thursday that he could ramp up government bond buybacks even further.
That came after the department announced on Wednesday it would double the size of its buybacks on longer-dated securities, sending the 30-year yield sharply lower.
The US dollar’s slide boosted the precious metal further. The dollar was 0.01% down against the pound at 73.3p and 0.04% down against the euro at 85.5 cents on Friday afternoon.
For anyone who missed the drama in the US bond market earlier this week – or who is simply scratching their head about what it means – here’s a handy explainer:
Ole Hansen, head of commodity strategy at Saxo Bank, wrote:
Gold surged again after a setback on Thursday as long-end Treasury yields climbed following a Bessent interview that failed to quell investor concerns about spiralling U.S. debt and fiscal sustainability.”
War, wildfire and cyber-attack anxiety leads to growing EU cash stocks
Lisa O’Carroll
The number of banknotes in circulation in the EU is increasing despite widespread smartphone payments, new data shows, with wildfires ripping through parts of Europe fuelling demand for an emergency stash of cash.
While cash plays second fiddle to contactless payments in many cities across Europe, the amount in circulation is actually going up, Philip Lane, the chief economist of the European Central Bank (ECB), said at the MacGill summer school conference in Ireland.
The rise of cash has been linked to anxiety over wars and the impact of cyber-attacks on online and contactless payment systems, say experts.
Lane said:
The total stock of banknotes is continuing to grow. In transactions, it [the number of notes] is coming down, but in terms of the stock [it is increasing].”
In 2025, EU residents were advised to stockpile enough food, water and essentials for 72 hours in case of an emergency such as this summer’s catastrophic wildfires in France and Spain, floods or storms as well as potential cyber-attacks or other hostile events.
Households were encouraged to have a crisis pack including bottled water, a transistor radio, canned food and, critically, cash.
More than 31m notes are in circulation compared with 24m just before the pandemic in 2019, with the €50 note the most popular in 2025 followed by the €100.
Bitcoin has jumped over 20% this week
Graeme Wearden
Back in the financial markets, bitcoin has hit its highest level since mid-May as the dollar weakens.
It’s been a sizzling week for Bitcoin which has climbed to over $79,400 this morning, from below $63,000 last Friday – a jump of over 22%.
So far today, it’s up almost 6%.
Crypto assets are benefitting from a weaker dollar today, which has been under pressure since Treasury secretary Scott Bessent intervened to prop up US government bond prices this week:
Axel Rudolph, chief technical analyst at investing and trading platform IG, says the crypto rally has gone “into overdrive”, explaining:
Crypto has surged higher this week, with Bitcoin rallying around 20% and Ether climbing roughly 25% as a powerful wave of buying swept across the market.
The bullish move initially began with a short squeeze, with bearish positions being forced to unwind as prices smashed through key resistance levels, creating a self-reinforcing burst of momentum. After months of fragile sentiment, the speed and scale of the rebound shows just how quickly crypto can turn when liquidity improves and investors rush to chase the move.
It’s not quite Bob Dylan, but a note from Morgan Stanley may still be music to some people’s ears, given that it’s titled: “The Vibes, They Are A-Changin’”
Bruna Skarica, an analyst at the investment bank, gave the UK economy this effusive praise in the note to clients this morning:
Sentiment in the UK has recovered from the post-energy shock lows. Underlying inflationary pressures look under control. Public finances are weathering the energy shock well too, due to robust tax receipts. Aided by a patient BoE and the tailwinds of global growth, UK economy is in an OK place.
She pointed to improving consumer confidence (see earlier post) and PMI results as the main bit of evidence, adding:
The totality of the evidence is consistent with a consumer that is feeling a bit more reassured about the economy and their personal finances than a few months ago.
And even on the fall in retail sales in July, she suggested this was mainly due to May and June being boosted by promotions being brought forward because of the early-summer heatwaves.
Skarica added:
We suspect part of the issue is earlier discounting this year, which in interaction with ONS seasonality adjustment, yielded artificially strong numbers for May and June, and an optically severe correction in July.
And while we’re back on retail sales, here’s our full report on the ONS data released this morning…
Can Andy Burnham fix the north’s rail services?
Improving economic sentiment is not the only challenge facing Andy Burnham heading into the autumn – he also has the unenviable task of trying to turn around Britain’s beleaguered rail network.
The prime minister, speaking in 2025 about rail routes in the north of England when he was still the mayor of Greater Manchester, said:
What is it about the rail industry which makes them think they can treat passengers in the north as second-class citizens?
Our transport correspondent, Gwyn Topham, reports on the job at hand…
Mark Zuckerberg buys 440-acre Strancally castle estate in Ireland
Rory Carroll
Mark Zuckerberg and his wife, Priscilla Chan, have bought Strancally castle, a gothic-style mansion in Ireland, for roughly €20m.
The castle, which comes with a 178-hectare (440-acre) estate in county Waterford, have been bought by the Meta chief exxecutive to use as a base during visits to Ireland.
A spokesperson said on Thursday:
Mark and his family are excited to continue caring for this historic home and look forward to spending time in Ireland, where Meta maintains its international headquarters.”
The price paid in the off-market deal is not known but the Irish Times, which first reported the sale, estimated a value between €20m (£17m) and €30m: approximately 10% of the cost of his 387ft superyacht.
The castle was built in 1830 for John Keily, a former Conservative MP, and designed on a lavish scale by the architects James and George Richard Pain, with a “brisk walk of four and a half minutes” needed to go from the dining room to the kitchen, according to the book The Houses of Ireland.
Consumer confidence hit its highest level in two years in August
In another positive sign for the economy, consumer confidence has hit a two-year high in August, according to a survey released overnight.
A long-running monthly index measuring consumer sentiment by GfK improved to -14, up from -17 in July (though yes, those figures are still in the minuses…).
Neil Bellamy, consumer insights director at GfK, sounded a note of caution:
Does all this mean that people have greater faith in the new government to increase growth and job opportunities? Can consumers finally see an end to the cost-of-living crisis? It would be tempting to say yes, but frankly it’s too soon to tell.
The survey found that more people think it is a good time to make a major purchase, with that part of the index rising five points compared with July to -7. The index measuring personal finances, meanwhile, ticked up two points to -6.
It comes after a swathe of measures from Prime Minister Andy Burnham designed to alleviate the pressure on household finances, such as capping bus fares and cutting VAT from energy bills.
While those negative readings may not look terribly optimistic, they are at least heading in the right direction. Whether that continues with rising energy bills and a Budget around the corner is another matter…
Thomas Pugh, the chief economist at consultancy RSM UK, added:
Consumer confidence rose to a two-year high in August, suggesting that consumers remain unfazed about renewed tensions in Iran and the risk of another tax-raising budget in the autumn.
Ministers urged to cut cost of loans for solar panels on UK homes
Fiona Harvey
Away from this morning’s stream of economic data, a thinktank is urging ministers to make solar panels cheaper for people on lower incomes.
Solar panel installations can save households hundreds of pounds a year in energy bills, but at an initial cost of about £5,000 to £10,000 they are beyond the reach of many households.
Loans are offered by some commercial companies to enable people to repay the cost over a longer period, but these come at high interest rates that can wipe out most of the energy bill savings for the first decade.
The rising cost of gas is set to pile on further hardship this winter, with the cap on UK energy prices likely to rise by 4% from this October to the equivalent of £1,729 a year for the rest of the year, according to forecasts published this week.
The Common Wealth thinktank is urging the government to step in by providing a universal entitlement to solar panels, which would be paid for by “solar bonds”.
These would be retail investment products that the government could offer on a similar model to national savings investments, or premium bonds – savers would receive interest payments on their cash in return for funding the scheme.
Economists are also taking heart from the PMI survey, which will come as a welcome positive sign after the less-than-ideal public finances data earlier this morning.
Jake Finney, a senior economist at PwC, said:
The latest PMI data provides increasingly encouraging signs that the economy is finding firmer footing.
The composite index has now been solidly in expansion territory for two consecutive months, suggesting that the economy is moving beyond the soft patch seen earlier this year and pointing to reasonably strong growth in Q3.”
He said that even with rising oil prices and uncertainty on the horizon in the US-Iran war, GDP growth is likely to come in a little above 1% this year, “which would be a welcome outcome given the shocks the economy has had to absorb”.
He added:
So far, the economy has proven more resilient than expected, but it is important to bear in mind that we are still a long way away from rip-roaring growth.”
UK services sector grows more than expected in August
Back in the UK, a similar economic survey points to unexpected strength in the services sector, where an output tracker hit its highest point since the start of the Iran war.
S&P Global’s flash poll of purchasing managers showed the sector reaching a six-month high of 52.8 in August, up from 52.1 in July, with companies citing improving domestic trading.
“The expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools,” said Chris Williamson, chief business economist at S&P Global.
The services sector, which encompasses shops and pubs as well as accountants and law firms – among many others – makes up about 80% of the UK’s private sector, meaning it is a closely followed indicator of the economy is faring.
Williamson said:
The expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools.
This reflects easing concerns, for now, over the economic impact of the war in the Middle East. Businesses are feeling more upbeat than at any time since the war began. Job losses are also moderating.
It’s clear, however, that the Middle East and concerns over domestic government policy continue to have a damaging effect.
Most worryingly, cost pressures remain high, largely due to energy prices and supply disruption linked to the Middle East conflict alongside high staffing costs.”
A reading that covers the whole private sector, meanwhile, was slightly lower, at 52.5, though still a four-month high. It was pulled down by the manufacturing sector which cooled to a five-month low of 51.5, down from 51.9 in July.
Energy intensive factory businesses have been hit especially hard by the war in Iran, which has driven up oil and gas prices.
French business activity contracted more than forecast in August, new data shows, in the first of several flash economic surveys this morning.
A poll of purchasing managers by S&P Global found that heatwaves dealt a blow to the country’s services sector, which is the dominant part of its economy.
The index for August fell to a two-month low of 48.4 points from 49.6 in July. Figures below 50 indicate a contraction in activity, while above 50 shows growth.
“The flash PMI report revealed another month of frail economic conditions, with some firms, mainly in the service sector, highlighting the extreme heat as a reason for lower activity and demand,” said Joe Hayes, senior principal economist at S&P Global Market Intelligence.
It is perhaps understandable that heatwaves took their toll, given the country battled with a series of devastating wildfires that forced hundreds of thousands of people from their homes in July.
Returning briefly to July’s retail sales figures, and there is some disagreement among the experts over whether the World Cup was good or bad for retailers.
Of course there is no doubt that it was a big boost for publicans, who enjoyed the best football-related uplift of recent years, of £150m.
But did that translate to shops too? If you tried visiting a corner shop before an England match then you might assume so – but Jacqui Baker, head of retail at the consultancy RSM UK, thinks otherwise:
Retail was not a World Cup winner, with many opting to cheer on England from the pub and prioritising their summer getaway, boosting hospitality and travel rather than retail sales.”
On the other hand Justin Parr, the chief credit officer at trade finance provider Treyd, said:
For half the month England were in the knockout stages of the World Cup. In a football-mad nation, that always helps to support sales, particularly for retailers of food and drink and clothing.”
And even the ONS itself, in its data release this morning, said food stores enjoyed rising sales volumes, which retailers “attributed to both the weather and the World Cup”.
Experts are urging caution on public spending after this morning’s public finances data, which was worse than expected.
Elliott Christensen, a senior economist at the Resolution Foundation think tank, said:
Stronger growth in the first half of the year contributed to strong tax receipts in July. But it has failed to deliver a wider public finances windfall as the economic impact of conflict in the Middle East has taken its toll on borrowing costs.
The Chancellor’s margin against his fiscal rules is now razor thin, with the healthy headroom of around £24 billion last spring likely to have fallen below £8bn. He should use his first Budget to put the public finances on a firmer footing and ensure that any new policy announcements are fully funded.
July data showed total public debt was £2.98tn, or 94% of GDP – up £96bn on a year earlier.
The graph below shows what that looks like in the context of the last two years.
Meanwhile, Henning Diederichs, the director for public sector at the Institute of Chartered Accountants in England and Wales (ICAEW), said the latest figures will make it “challenging for the Chancellor to both increase public spending significantly and stay within the government’s existing fiscal rules”.
The FTSE 100 has opened slightly up, helped by strength in mining stocks and banks.
The blue-chip index was up 0.1% at 10,760 points in early trading, with miners Fresnillo, Antofagasta, Endeavour, Anglo American and Glencore all among the top risers.
Meanwhile, the pound was also slightly up against the US dollar, rising 0.12% at $1.364.
UK reports unexpected deficit of £1.8bn as John Healey prepares for first budget
Heather Stewart
Elsewhere, official data shows that the UK government ran a larger-than-expected £1.8bn deficit in July.
The figures underline the challenges facing the chancellor, John Healey, as he draws up his first budget.
City economists had expected a shortfall of zero for July, a month when Treasury receipts tend to be swollen by self-assessment income tax payments.
However, the Office for National Statistics said that despite strong tax receipts, public sector borrowing last month was £1.8bn.
In the first four months of this financial year, the cumulative deficit was £56.7bn – lower than last year but still running £2.3bn ahead of the Office for Budget Responsibility forecast.
Total public debt was £2.98tn, or 94% of GDP – up £96bn on a year earlier – in line with Labour’s plan to borrow for investment in infrastructure projects.
Healey said:
Fiscal discipline is the bedrock of our UK economic stability and national security, which is why we are committed to meeting our fiscal rules, with a buffer against global uncertainties.
We are cutting the deficit faster than any other G7 economy, while giving people a bit of breathing space with cost of living pressures and focusing support to get young people into work.
Despite the monthly fall, the ONS said, sales volumes still rose for the three months to July (the darker of the two lines), boosted by stronger showings earlier in the summer.
The retail sales data suggests that previous resilience among British consumers in the face of war and rising energy prices may be dropping off slightly, experts said.
Even with the World Cup boosting the early part of the month, some have suggested that the hot weather may have (understandably) deterred shoppers from venturing outside, despite earlier reports to the contrary…
Sandra Prince, head of consumer at Lloyds, said:
After an extended spell of warm weather across large parts of the UK, many households will already have bought what they need for the season, while lines of popular summer products come to an end.
The boost from the World Cup that came to an end in the first half of July also meant fewer opportunities to capitalise on the warmer conditions.
Even so, the picture is unlikely to be uniform. Hotter days could have shifted footfall and spending online or towards retail parks.
For retailers, as the summer peak slows down, attention is now turning to the opportunities the autumn could bring to keep consumers engaged.
Andrew Hunter, senior economist at Moody’s Analytics, added:
The 0.5% fall in U.K. retail sales in July suggests the resilience of consumer spending over the first half of the year is fading. The weakness may partly reflect a temporary drag from the exceptionally hot weather, which the ONS notes reduced footfall in many stores.
But alongside the continued boost from the World Cup, warm temperatures are also reported to have helped sales in other retailers, notably supermarkets.
The July fall follows a run of strong monthly gains and the sharp rise in consumer confidence suggests renewed strength could lie in store, with the GfK index surging again in August to its highest level in two years.
That said, the full impact of the jump in energy prices is only now feeding through to households and, with the labour market still struggling and rising inflation eroding real incomes, we expect retail sales growth to slow over the second half of 2026.
Introduction: Retail sales fall despite World Cup and hot weather boosting drinks trade
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Retail sales fell in July after a bumper period the previous month, despite the World Cup luring and the hot weather boosting alcoholic drink sales in supermarkets.
The total volume of goods sold in stores and online fell 0.5% in July, according to the Office for National Statistics (ONS), compared with a 1% rise in June.
The drop was partly down to non-food sales dropping back in July, after British retailers had brought promotions forward to June because of the hot weather. The ONS said there was “evidence of reduced promotions in July” among household goods and clothing retailers.
But shops selling alcoholic drinks and beverages “performed well, which they attributed to promotions, the hot weather, and the World Cup,” it said.
ONS chief economist Grant Fitzner said:
Retail sales increased in the latest three months, with all main sectors, apart from motor fuel, seeing growth.
Some retailers told us that hot weather and promotions helped sales of outdoor products and items such as fans, with clothing and online sports merchandise also doing well.
The figures come after UK consumer confidence jumped to a two-year high last month, according to a closely followed monitor. That is despite tensions in Iran flaring up again and a jump in energy bills last month making a dent in consumer finances.
GfK’s Consumer Confidence Index rose to -14 from -17 in July, but with inflation rising again and ongoing uncertainty in the Middle East, “there are still many challenges ahead that will test the mettle of UK consumers,” said Neil Bellamy, consumer insights director at GfK.
Elsewhere, oil prices were at one-month highs amid the ongoing deadlock between the US and Iran. Brent crude was at $93.42 a barrel, 0.38% down for the day but still trading higher than at the start of the week.
Asian share indices were mixed on Friday as stress in global bond markets showed little sign of abating. Japan’s Nikkei index was down 0.53%, although South Korea’s Kospi was up 0.87% and Hong Kong’s Hang Seng was up 0.92%.
The agenda
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7am BST: ONS retail sales data
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7am BST: ONS public finances
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9am BST: Flash PMI eurozone
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9.30am BST: UK flash PMI
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2.45pm BST: US flash PMI
