Confidence returns to pre-war levels

Britons' confidence in the outlook of the economy and their household finances has returned to levels seen before the war in Iraq, new figures showed yesterday.

The research firm Martin Hamblin GfK said its consumer confidence barometer rose to minus 3 in May from minus 5 in April, and well above the eight-year low of minus 10 clocked during the war. But Alan Castle, an economist at Lehman Brothers, said the impact of the conflict only accounted for part of the fall.

Expectations for future personal finances rose two points in May to 11 while expectations for the future general economic situation showed a sharp improvement, rising 11 points to minus eight.

Perceptions of the benefits of making major purchases in the current climate rose 12 points to plus 17, which Martin Hamblin said was "good news" for retailers.

"With strong house prices and low interest rates ... it is reasonable to assume that confidence is not set for a sharp decline," George Buckley, a UK economist at Deutsche Bank, said.

Official figures showed that retail spending growth fell to its lowest level in four years last month.