The figures from Gallup show that 33 per cent of consumers expect the economy to deteriorate in the coming year, compared with 28 per cent expecting improvement. Two months ago optimists outnumbered pessimists by two to one. The number of consumers believing now to be a good time to make large purchases also fell.
Further signs of consumer hesitancy emerged with a surprising fall in the broad measure of money M4 - cash plus bank and building society accounts - in June, although analysts blamed this on technical factors.
M4 fell by a seasonally adjusted 0.2 per cent in June, cutting the annual growth rate from 3.8 to 3.3 per cent. In part this reflects the fact that the Government borrowed less than it raised from gilt sales last month.
Lending by the main British banks rose by pounds 800m in June, compared with pounds 1.5bn in the previous month, separate figures showed. New mortgage commitments also picked up from pounds 2.8bn to pounds 3.2bn in June, but remained down on a year ago. Housing turnover also showed a small increase.
The pound rose slightly on the day, with the French franc falling half a centime back towards its floor in the European exchange rate mechanism. Trading in the ERM was nervous ahead of today's German 'repo'.
Meanwhile, Alan Greenspan, chairman of the US Federal Reserve, issued a stern warning that he stands ready again to tighten monetary conditions in the US economy in spite of recent signs that inflationary pressures are easing.
He said trends at the start of this year meant that 'on balance, the news on inflation must be characterised as disappointing'. He said President Bill Clinton's planned tax increases were deterring business expansion, but urged support for deficit reduction.
The Organisation for Economic Co-operation and Development warned that unemployment in the world's 24 richest democracies would reach a post-war high of 8.5 per cent this year. Involuntary part-time work and people giving up job-seeking make the true picture even worse. The jobless rate is expected to rise further in 1994, but to fall slightly in Britain.
View from City Road, page 26Reuse content