On Friday, UK midcap stocks recorded their worst performance in a week since early July, as this week saw a release of grim data.

Consumer sentiment in August touched a record low stoking worries about a recession in the fifth-largest economy in the world.

Index performance

There was a 1.2% drop in the FTSE 250 index, which has more domestic economy exposure, and its weekly losses amounted to 2.2%.

Some of the stocks that had the worst performance on the index were retailers, industrials and airlines. Meanwhile, there was a 0.1% rise in the FTSE 100 index, which is exporter-heavy.

This was thanks to a fall in Sterling’s value to a low of five weeks. There was a decline in consumer sentiment in Britain in the month of August to its lowest value after 1974.

According to a survey, this is because households have become exasperated because of rising costs. There was also other data showing that more was spent by British shoppers in July because of online shopping promotions.

However, data in early August showed that there was a big drop in real-time figures on spending through debit and credit cards.

But retail stocks got no respite from the numbers, as there was a 2.5% drop in the sector and there was a gloomy long-term trend.

UK economy

Market analysts said that the consumer backdrop was very gloomy and this is certainly not good for the UK economy because consumer spending makes a strong contribution to it.

The Bank of England (BoE) has the major challenge of getting inflation under control and doing it without hurting households and businesses too much.

This task appears to be almost impossible, which has given rise to the possibility of stagflation, which would mean rising prices and a slowing economy.

Interest rates have already been hiked up by the British central bank about six times since December. But, traders have already bet that policymakers are unlikely to change their track.

As a matter of fact, another interest rate hike of 50 basis points has already been priced in for controlling inflation, which has already exceeded 10% in the previous month.

Global markets

This week has already seen global stock markets suffer after they had experienced a strong rally from lows hit in June.

It is because most central banks had supported aggressive increases in the interest rates in order to curb inflation, even though there were indicators that growth was slowing down in the economy.

There was a 39.2% drop in Joules Group after the fashion retailer predicted an annual loss. There was also a 58.3% drop in shares of Cineworld, which brought them to a record low.

This was after a report saying that the second-biggest cinema chain operator in the world was gearing up to file for bankruptcy.

Sterling has also been declining against the US dollar, with the latter strengthening due to its status as a safe-haven reserve and this trend is likely to continue for now.