John Speck
LONDON: The closely-watched Consumer Confidence Barometer, compiled by
research group GFK Ltd. on behalf of the European Commission, showed overall
confidence falling just two points to plus one. The fall followed a modest
one-point rise in the index in March.
Consumer confidence has become a crucial indicator in the UK economy, since
the pace of economic growth this year may well hinge on domestic spending, as
export demand is frail. The GFK report provides a snapshot of confidence between
April 3 and 12, when the foot-and-mouth livestock crisis was dominating news
headlines, conjuring up images of a country in permanent crisis.
While consumers are relatively optimistic, a second report published on
Monday served warning that job losses in Britain later this year could hit
sentiment, prompting consumers to snap their wallets shut. "There could be
a hangover ahead, as news of high-profile job losses sinks in later this year.
Job losses can sometimes have a disproportionate effect on sentiment,"
said, a business think-tank, Consumer Futures director, Richard Holt.
After a long period of unbroken economic growth dating back to the early
1990s, the average Briton still feels pretty confident as unemployment is just
3.3 per cent, real incomes are rising, and the economy is still growing, albeit
slowly.
Periodic job cuts loom in city of London
But the manufacturing sector is still losing jobs at an alarming rate and there
is a risk of spillover losses into the much larger service sector. "Job cut
announcements have so far focused on electronics, but there is also anxiety that
the City of London (financial district) may be poised for one of its periodic
job culls," Holt said.
US mobile phone giant Motorola Inc said last week it was closing its plant
just outside Edinburgh, with the loss of more than 3,000 jobs, while Compaq
Computer Corp announced at the beginning of April it was shedding 700 jobs at a
computer assembly site near Glasgow.
There is some evidence of a gradual weakening in confidence, particularly
from the recent reports by polling group MORI, which put overall economic
confidence at a lowly minus 22 per cent in its last survey. The overall consumer
confidence figure is composed of five different measures of confidence, ranging
from personal finances to specific questions about the general economic
situation.
Most of these individual measures showed deterioration, with expectations for
the outlook for the general economic situation falling to minus 14 points in
April from minus 8 last month. The reading is now the lowest seen for this
measure since September 2000, when it was minus 19. With a general election
widely expected for early June, the ruling Labour party will want the election
held and won well before consumer sentiment starts to weaken further.
(C) Reuters Limited 2001.