Iraq factor kicks in on economy
FRESH fears that war with Iraq is hitting Britain's fragile economy were sparked today by a new report showing consumer confidence has plunged to its lowest for almost eight years.
Research house Martin Hamblin GfK said its confidence barometer slipped another point this month to minus 10. The latest fall, which follows a six-point drop in February, takes the measure to its lowest since December 1995.
While people's perception about their own personal finances has held up reasonably well, their expectations about the economy have tumbled to their lowest since September 1990 - during the build-up to the first Gulf War. Some 55% of respondents expect the economy to deteriorate over the next 12 months.
The survey was conducted between 27 February and 18 March, cutting off two days before the start of the conflict.
But Roger Wright, a director at Martin Hamblin GfK, was optimistic, saying: 'Uncertainty about war depressed the scores in the latest survey. Now that things are a little bit clearer, I imagine confidence will pick up.'
However, he added that economic woes were also depressing sentiment. He said: 'What is really bugging people are concerns about the general economic situation. Low interest rates and the falling stock market mean it is not a good savings climate.'
Last year's consumer boom was the economy's main prop, with strong High Street sales and the red-hot housing market helping to compensate for the recession-hit manufacturing sector.
Today's report will add to mounting concern that consumers are reining in their spending at a time when manufacturing is still floundering. The report showed only 32% of respondents felt now was a good time to make a major purchase.
Meanwhile, the International Monetary Fund added to economic woes, with leaked reports suggesting it is poised to cut its 2003 global growth forecast from 3.3% to 3%. Meanwhile, world oil prices surged to their highest since the start of the Iraq war on growing fears of a long conflict that risks hitting Middle East fuel supplies.
Traders warned that British motorists could face petrol price rises in the coming months, given the added pressure of a 40% cut in output in Nigeria as violent clashes between tribal factions force oil giants to suspend production.
The price of a barrel of US light crude traded on Nymex hit a high of $30.76 before profit-taking set in. North Sea Brent shot up as far as $27.74 before retreating to $26.81, down a cent on the day, by late afternoon.
THE International Monetary Fund is poised to cut its 2003 global growth forecast from 3.3% to 3%, according to sources. Its twice-yearly World Economic Outlook, published on 9 April, will also trim its forecast for the eurozone from 1.3% to 1.1%.
News of the imminent downgrades comes a day after the World Bank said it was lowering its global forecast from 2.4% to 2.3% and warned the US could slide into recession and deflation if war with Iraq turns out to be lengthy.
