The FTSE 100 slumped 1.6% this morning as GDP data revealed the fragility of the UK economy and housebuilders’ shares suffered as house price growth slowed.

The blue-chip index dropped 118 points to 7,194 as a ‘sense of foreboding’ gripped markets, said Susannah Streeter, senior market analyst at Hargreaves Lansdown, with investors fretting that central bank measures to tackle red-hot inflation are weakening economies.

Although the Office for National Statistics (ONS) reported that GDP growth was 0.8% in the first quarter, in line with expectations, that is down from 1.3% in the fourth quarter of 2021.

More worryingly, the ONS said household incomes fell for the fourth quarter in a row – down 0.2% after adjusting for inflation – in the longest successive decline since 1955. This left incomes down 1.3% year-on-year even before energy bill hikes and a national insurance hit in April.

Streeter said the latest round of data had put the fragility of the UK economy in the spotlight.

‘With consumers having even less spending power than initially thought, before the harsh route higher inflation has taken in recent months, it’s adding to concerns about their financial resilience,’ she said.

Housebuilders led UK market indices lower as Nationwide’s latest house price report showed a cooling in the property market. The building society said prices were up 0.3% in June, taking the annual increase to 10.7%. But on a quarterly basis prices have only increased 6% versus 7.4% in the previous three months. The average UK home now costs £271,613.

Myron Jobson, a senior personal finance analyst at Interactive Investor, said property prices had risen faster than wages, creating ‘an affordability squeeze’.

‘These factors, as well as the prospect of higher interest rates to rein in runaway inflation, are likely to go some way towards taming frothy housing prices,’ he added.

The data took its toll on building shares this morning, with Persimmon (PSN) down 3.9%, or 75p, at £18.40, Barratt Developments (BDEV) falling 3.7%, or 17p, to 458p, and Berkeley (BKG) losing 2.3% to trade at £36.86.

B&M (BME) was the biggest faller on the FTSE 100, dropping 4.5%, or 17p, to 368p, after the discount retailer reported that sales slumped almost 20% during the first five weeks of its new financial year, defying predictions that squeezed consumer will flock to lower-cost stores.

The FTSE 250 shed 1.5%, or 302 points, to reach 18,736. The decline was led by Aston Martin Lagonda (AML), which tumbled 10.3%, or 49p, to 430p as the luxury car maker was rumoured to be looking to raise funds to shore up its balance sheet.

Liontrust Asset Management (LIO) was down 6.6%, or 66p, at 932p and online fashion retailer Asos (ASC) lost 5.5% to reach 807p.

In investment trust news, Urban Logistics (SHED ) fell 4.9% to 162p despite strong results from the logistics investor last week. Abrdn Private Equity Opportunities (APEO ) continued the falls suffered this week, down 4.6% at 447p. Henderson Smaller Companies (HSL ) lost 3.9% to reach 795p, and Chrysalis Investments (CHRY ) shed 3.9% to hit 108p after interim results.