Consumers a little perkier

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The Independent Online
Business confidence is high, while consumer confidence is low but showing tentative signs of improvement, according to separate surveys published yesterday.

There was a glimmer of hope that consumer confidence has started to improve in this month's Gallup survey. The overall confidence index has recovered to minus 11 from minus 13 last month, although this still reveals more gloom than during the second half of 1994.

There were small improvements in consumers' assessments of their own and the economy's prospects in the next 12 months. However, the biggest advance came in their view of household finances during the past 12 months. The balance reporting their financial situation had improved rose from minus 21 to minus 17 - the best figure since September 1993.

Keith Skeoch, chief economist at James Capel, said the better economic environment was beginning to filter through. ``If the improvement is sustained, it will be the first objective sign of an emerging feel-good factor.''

But David Hillier at NatWest Markets thought the pick-up in confidence would be reversed, thanks to this month's tax increases and higher mortgage interest payments.

Businesses remain very confident about the economy. Dun & Bradstreet's latest survey found that eight out of ten companies expect to increase sales during the next quarter. The recent rise in confidence has spilled over from manufacturing to services, where there has been a 20-point rise in the optimism index since January.

There was also good news on price expectations. After a sharp rise last quarter in the number of firms expecting to increase selling prices, the latest quarter has brought a small decline.

Evidence of the bulge of higher prices working along the inflation pipeline is shown in Dun & Bradstreet's finding that the proportion of retailers expecting to raise prices climbed from 66.5 to 69.5 per cent. But the proportion of wholesalers planning price increases has fallen.

Unadulterated gloom yesterday came from the housing market. Barclays Bank's index of mortgage lending showed a 25 per cent rise in lending last month, but the increase in activity was purely seasonal.

Lending in March was 13 per cent lower than a year earlier.