The much respected Martin Hamblin GfK consumer confidence index fell sharply in February following a small rise in January probably reflecting a growing unease about the probable effect of war on the economy and increases in national insurance and community charges due in April.
53% of respondents thought that the economy would deteriorate in the next year. This corresponds with a MORI poll that showed 58% of people taking a gloomy outlook. The number of people planning to reduce their expenditure on large items fell by 36% which might support the growing fear that consumer spending if set to decline this year.
It now seems certain that the post Christmas increased sales figures were just a blip and the underlying three month trend has declined to its lowest level since November 2000. The strongest sectors at the moment appear to be those selling durable goods like fridges and DVD players. The weakest are the specialist food retailers and off-licences.
The gloomy scenario for retailers was also reinforced by the CBI's latest survey which shows that sales growth has fallen to its lowest level in four years. 34% of businesses said that sales growth in February was poor compared to just 19% which indicated it was good and 47% flat.
Goldman Sachs predict that the combined effect of community charge and national insurance increases could reduce disposalbe income by 1% which will further depress consumer confidence.
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