THIS MORNING'S papers report that a year of natural disasters has left Britain's consumers at their least optimistic about the economy since the Iraq war.
GfK, the research firm that compiles consumer confidence data for Eurostat, said its confidence index fell to minus 9 in December from minus 8 the previous month. It was the lowest result since March 2003., reports the Times.
The surprisingly weak figure will strengthen the argument that the Bank of England should cut interest rates in the new year to shore up subdued domestic demand, the paper says.
A change in rates next month is considered unlikely, although one member of the Bank’s Monetary Policy Committee voted for a cut in rates this month. But some analysts believe that the Bank may move to cut rates in February.
Pessimism among consumers has been growing fairly constantly since the summer, according to GfK’s figures. Carol Bernasconi, divisional director at GfK, is quoted as saying: “Consumer confidence is not yet showing signs of an upturn and a year which has seen an unprecedented level of natural disasters across the world has left this nation in a subdued mood.”
Perception of the general economic situation during the past year remained at minus 29 — nine points lower than last December. The same index of perceptions of next year’s economy was stronger, at minus 20.
ACCORDING TO the Telegraph the news will be a blow to Chancellor Gordon Brown, as twice as many people as last year said they thought the economy would weaken further.
Consumer spending drives around two thirds of the economy, and a weakness in confidence tends to foreshadow a weakness in spending. This year, high street retailers have suffered as higher taxes and household bills left shoppers out of pocket. Reluctance to spend has led to a drastic slowdown in growth, says the paper.
A KEY DEFENDANT in the Enron prosecution yesterday agreed a last-minute plea deal, potentially worsening the outlook for his former bosses Kenneth Lay and Jeffrey Skilling who are due to face criminal trial next month, reports the Guardian.
Richard Causey, the former chief accountant at the bankrupt energy group, pleaded guilty to a single charge of securities fraud in exchange for a seven-year sentence. The plea deal could prove pivotal in the most eagerly anticipated trial to emerge from the corporate scandals that gripped Wall Street in 2002. Causey had detailed knowledge of the financial workings at the company and will now help the prosecution to prepare its case against Lay and Skilling, former Enron chief executives. It was not clear whether he would also take the witness stand.
SCOTLAND'S top business leader has provoked a political row by calling for more public services to be privatised and subject to regular competitive tendering, reports the Scotsman.
In his New Year message, published today, Iain McMillan, the director of the CBI in Scotland, calls on the Executive to make 2006 the year of "investment and public service reform".
McMillan argues that recently published government figures show the massive increase in public spending by the UK government has resulted in a significant gap between the £34bn that Scotland generates in taxes and the £45.3bn it spends.
The paper quotes McMillan as saying this is not sustainable. McMillan claims the increases in public spending in Scotland "need to be regarded as a temporary financial windfall" that will disappear over time as the Barnett formula - which allocates a proportion of public spending in England and Wales to Scotland - closes the gap between expenditure north and south of the Border.IFAonline
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