Summer unrest and economic turbulence hits UK shopping
THE UK riots and turbulence on world markets knocked British consumer confidence last month, according to a new survey published today.
Three successive monthly falls have left the Nationwide's Consumer Confidence Index languishing just seven points above the all time lows recorded in February, and 30pc below its average.
However, the Nationwide said its Spending Index did show spending increased in August, despite the weakening economic outlook, which could be down to growing expectations that interest rates will remain low well into 2012.
The widespread looting in early August and stock market turmoil triggered by fears over global growth will all have dented confidence in the UK, Nationwide said.
The downbeat survey added further gloom over the economic picture after the International Monetary Fund yesterday slashed its growth forecasts for the UK.
Robert Gardner, Nationwide's chief economist, said: "Further signs that the UK economy is struggling to gain momentum, disorder in a number of English cities and renewed turbulence in global financial markets would all have been expected to weigh down heavily on confidence during the month."
Mr Gardner said the global economic backdrop is particularly challenging at the moment with ongoing problems in the eurozone and signs the US recovery may be running out of steam.
He said: "This is important because the UK is unusually reliant on exports to drive the economy forward at present.
"Household spending is under severe pressure, with wages not rising fast enough to keep up with the cost of living, while government spending is being held back by austerity measures.
"Therefore, until exports pick up, labour market conditions are likely to remain difficult, and without a stronger labour market, confidence is likely to remain subdued."
The UK will see gross domestic product (GDP) grow 1.1pc in 2011, compared to its last forecast of 1.5pc, according to the IMF, and will fall behind Germany, France, the eurozone, US and Canada.
The IMF said the US economy could be weak for years to come and warned that policymakers in the country must balance support for the economy with fiscal tightening.
The organisation, now led by former French finance minister Christine Lagarde, also said the forecasts were dependent on the eurozone debt crisis being contained.
The Treasury said the Government remains committed to its tough programme of spending cuts and tax reform while the unions and opposition called on Chancellor George Osborne to rethink his plans.