Consumers taking a dim view

Consumers have become more gloomy about prospects for the economy following last month's half-point rise in interest rates, but they are more hopeful about their own financial circumstances, according to the latest survey by Gallup.

Optimism over the economy has dropped to a four-month low. Some 25 per cent of consumers say they expect the economy to improve in the coming 12 months while 32 per cent expect it to get worse.

The financial markets are waiting anxiously to see whether today's Confederation of British Industry trends survey shows a similar deterioration in business confidence.

The net balance of consumers expecting their financial circumstances to get worse over the coming year has fallen fractionally even though the upward turn in the interest rate cycle could lead to a period of rising mortgage rates.

People are more optimistic about unemployment, but the small net balance of people expecting inflation to rise has changed little in recent months.