Threat of War Hits Consumer Confidence

Overall, the Consumer Confidence Index figure as carried out by Martin Hamblin GfK on behalf of the European Commission in the UK plummeted by six points in February and currently stands at -9. This score is the lowest seen since October 1998, when economic turbulence in Asia impacted greatly on UK consumer confidence.

All five of the key measures have decreased, in particular the measures relating to the general economy and the benefits of making purchases at the present time. The ever-increasing threat of war with Iraq is the key contributor to the sheer drop in confidence this month, with concerns about the UK stock market contributing to a lesser degree.

Perceptions of the development of personal finances over the last 12 months decreased by 2 points in February, registering a score of +2. This score is down 2 points from that attained this time last year and is the lowest seen since November 2000.

Expectations for the future of personal finances have fallen by 3 points during January and currently stand at +9. This month's result is also down 5 points year on year and is the lowest seen since November 2001.

Perceptions of the development of the general economic situation dropped considerably during February. The measure currently registers a score of -37, having dropped by 8 points from this time last month. In total, 59% of those questioned believe that the general economic situation has worsened over the past 12 months. This is the lowest score seen since June 1995, when the measure also stood at -37. The last time the measure fell beneath this level was in June 1993. The measure is down 23 points from this time last year.

Expectations for the future of the general economic situation dropped by 5 points during February and currently register a score of -33. Overall, 53% of those questioned believe that the general economic situation will worsen over the next 12 months. This is the lowest score seen since October 2001 (when a score of -33 was also recorded) following the events of September 11th. The last time the measure fell beneath this level was in September 1989. Over the past 3 months this measure has dropped a total of 23 points; the increased likelihood of a war with Iraq has been instrumental in this downturn in confidence.

Perceptions of the benefits of making major purchases in the current climate fell by 13 points in February. This measure currently registers a score of +12. This is the lowest score achieved since December 2000 (when a score of +5 was recorded). The measure is down 12 points year on year. Although this month's decrease is relatively large, it is not entirely unexpected, as typically a drop is seen between January and February due to seasonal effects.

The measure relating to spending intentions over the next 12 months has fallen by 1 point this month and currently registers a score of -10. This is the lowest score seen for this particular measure since December 1998 when a score of -11 was recorded. Overall 36% of those questioned anticipate that they will be spending less on major purchases over the next 12 months compared with what they spent over the last 12 months.

The measure relating to expectations for the cost of living over the next twelve months has risen by five points to register a score of +78. An increase in this particular measure denotes that a higher number of consumers anticipate that there will be a more rapid increase in prices over the next 12 months. During February 25% of those questioned expect there to be a more rapid increase in prices over the next 12 months. Moreover, February's score of +78 is the highest level seen since June 2001, where a score of +84 was recorded.

The measure relating to the perception of the current savings climate fell by four points during February. The current score of +11 is the lowest ever recorded for this particular measure, with 51% of sample believing it to be an unfavourable time to save. This result coincides with the Bank of England's announcement to reduce interest rates by 0.25% to 3.75% on February 6th.

The survey was conducted amongst a sample of 2045 individuals aged 16+. Quotas were imposed on age, sex, region, social class and income to ensure the final sample was representative of the UK population. Interviewing was conducted from 30th January - 18th February 2003

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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