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Iraq war fears hit confidence

From the archive, first published Friday 28th Feb 2003.

Fears of an imminent war in Iraq has sent consumer confidence plummeting to its lowest level for five years.

The confidence barometer, conducted by Martin Hamblin GfK, registered an overall drop by six points to minus nine for February with more than 50 per cent of people questioned expecting the general economic situation to worsen in the next year.

Concerns about the UK stock market also played their part.

Expectations for the future of the general economic situation dropped five points to minus 33 - the lowest score since the September 11 terrorist attacks.

In the past three months this measure, one of five employed by the monthly survey, has dropped a total of 23 points. The last time it fell below minus 33 was in September 1989.

Martin Hamblin GfK, which spoke to more than 2,000 people, said: "The ever increasing threat of war is the key contributor to the sheer drop in confidence this month, with concerns about the UK stock market contributing to a lesser degree."

Consumer confidence is now at its lowest since the Asian economic collapse in 1998 which caused global turmoil, particularly in the UK.

All five of the key confidence measures used by Martin Hamblin GfK were down on last month with those relating to the general economy and the benefits of making purchases worst hit.

Simon Rubinsohn, chief economist with fund manager Gerrard, said: "It is conceivable the latest spike downwards could prove to be a replay of the events in the latter part of 2001 when the Twin Towers attack badly affected sentiment, albeit only temporarily. On that occ-asion, spending proved remarkably resilient.

"This time around, the fundamental background for consumers is rather less supportive with real income gains being squeezed by higher inflation, concerns about the property market growing and higher taxes about to be implemented."

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