War fears spark economic gloom
Build up to war triggers fall in house prices, reduced consumer spending and slowed lending growth, industry results show.
Staff and agencies
Thursday March 20, 2003
War fears cast a cloud over the UK economy today after it emerged that consumers had continued to rein back spending. High street sales figures in February fell for a second month in a row amid uncertainty over the economy and an Iraq conflict.
And elsewhere data showed the first fall in house prices in two years.
Philip Shaw, chief economist at Investec bank, said: "It's clear that the threat of war in February undermined consumer spending to some degree. The question is, by how much?"
Today's data from the Office for National Statistics (ONS) showed retail sales volumes eased 0.1% in February after a 1% decline in January. The fall left year-on-year sales growth at 3.2% - the lowest rate since July 1999.
Simon Rubinsohn, economist at fund manager Gerrard, said general economic uncertainty was also playing a part in the slowdown. "Consumers are taking things much more cautiously," he said. "They've been spending like crazy for a couple of years and they're now no longer prepared to do so."
War and economic fears were also blamed by the Royal Institution of Chartered Surveyors (RICS) for a fall in house prices in England and Wales. While February's slide was relatively modest, it was still the largest recorded drop in eight years. London was hardest hit, with prices falling at the fastest pace for a decade.
At the same time, overall levels of lending growth showed signs of slowing, falling to £17.8bn in February from £19.4bn the previous month, the Council of Mortgage Lenders said.
Meanwhile, the Confederation of British Industry (CBI) said the prospects for manufacturers remained bleak after expectations for output hit their lowest level in a year. Ian McCafferty, the CBI's chief economic adviser, said the findings put added pressure on the chancellor to help manufacturers in next month's Budget.
Today's data will provide further concern for the Bank of England, which in the past has seen consumer confidence balance the ailing industrial sector. Economists said concerns over the recent rise in inflation were likely to prevent another cut in interest rates next month. |
