LONDON, July 30, (Agencies): British consumer morale fell to its lowest in almost a year in July as worries about the impact of government spending cuts drove expectations for the next 12 months to their lowest since the deepest point of the recession.
The GfK/NOP Consumer Confidence Index fell three points to -22, its lowest since last August and below analysts’ forecasts for a more modest decline to -20.
The survey was taken after the new coalition government announced the deepest spending cuts in a generation, but before official data showed the economy grew at its fastest pace in four years from April to June.
Nonetheless, it was the fifth consecutive fall in the confidence index, and GfK director Nick Moon said the downward trend pointed to a risk that the recovery could fizzle out.
“The continuing slide in the index makes a double-dip recession look more of a possibility as each month goes by,” he said. “It’s possible that respondents are already factoring into their view of the economy over the next 12 months the likely recessionary impact of the government’s announcement about the level of spending cuts it wishes to make.”
Finance minister George Osborne unveiled plans to wipe out a government deficit of around 11 percent of economic output over the next five years, with some departments facing cuts of as much as a quarter of their budget.
The austerity measures are likely to lead to thousands of job losses in the public sector — which employs a fifth of Britain’s workforce — while a 2.5 percentage point rise in value added tax to 20 percent from January will weigh heavily on household finances.
The index gauging people’s expectations for their personal financial situation over the next 12 months fell 4 points to -6, the lowest since March 2009, when Britain was in the depths of its worst recession since World War Two.
Britons’ view of the general economic situation over the next 12 months slipped 13 points to -25, also the lowest since last March. However, the index gauging Britons’ willingness to spend improved to -16 from -24, the highest since February.
“This might be people thinking they should buy now before VAT goes up, or might reflect a view that the poor economic conditions mean there are bargains to be had,” Moon said, noting that it may also be a rebound after a sharp fall in June.
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DUBLIN: The Central Bank of Ireland raised its forecast Friday for the nation’s battered economy, predicting growth this year of 0.8 percent as multinational companies boost their exports out of the country.
But the central bank warned that Ireland’s domestic economy remains weak, with consumer spending and average prices both projected to fall a further 1.2 percent this year.
Ireland’s long-booming economy has been shrinking since 2008, when the global credit crisis accelerated the collapse of a runaway property market. The government has been slashing spending and raising taxes for the past two years in a struggle to contain its ballooning deficit, slashing citizens’ incomes and living standards in the process.
Friday’s quarterly report said unemployment would flatline this year at 13.5 percent, a 16-year high, before a weak recovery in domestic demand and jobs begins next year.
It said gross national product — considered a better measure of Ireland’s real economy because it excludes the largely transferred profits of 1,000 multinational companies — would keep sliding a further 1.0 percent this year before rebounding 2.2 percent in 2011.
The central bank in April previously forecast that GDP would fall 0.5 percent and GNP 1.5 percent in 2010. It cited the unexpectedly strong growth in exports, particularly software and pharmaceuticals to the United States, as key to the improving outlook.
The report noted that resumed emigration — a chronic feature of Irish life until the Celtic Tiger boom began in the mid-1990s — was moderating Ireland’s unemployment rate. It said the size of the labor force would decline 2.1 percent this year and a further 0.6 percent in 2011.
Recent Irish surveys have indicated strong rates of emigration by Eastern Europeans who flocked to Ireland when the European Union expanded in 2004, as well as recent college graduates and construction workers.
One traditional bulwark of Ireland’s rural economy, tourism, has suffered heavy losses in business since 2008 as recession-wary American and European travelers increasingly stayed at home. The latest figures published Friday said 502,500 people visited Ireland in May, down 23.6 percent from the same month of 2009. Travelers from Britain fell 30 percent, the United States 16.7 percent.
Dozens of recently built hotels face bankruptcy and takeover by Ireland’s fledgling “bad bank,” the National Asset Management Agency. That bank has begun acquiring nearly 80 billion euros in toxic property-based debts from five Irish banks.