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U.K. consumer confidence falls to lowest level since Margaret Thatcher's downfal

Mon, Jun 30 2008, 12:27 GMT
by Benny Menashe

Finotec Group Inc.

U.K. consumer confidence dropped in June to the lowest level since the London riots that preceded Margaret Thatcher's downfall in 1990, as house prices fell across the nation. An index of consumer confidence based on a survey of 2,001 people fell 5 points to minus 34, the lowest since March 1990, GfK NOP Ltd. said today. Property prices dropped 1 percent from May, the most since Hometrack Ltd.'s housing index started in 2001, the London-based researcher said in a statement.

``With rising inflation, gloomy forecasts for interest rates and soaring fuel, utility and food prices dominating the front- page headlines, it's no surprise that confidence in the general economy is almost in freefall,'' Rachael Joy, a researcher at GfK NOP, said in a statement. The confidence gauge is only one point higher than in March 1990, on the eve of the country's last recession. On March 31st, as Thatcher's government introduced a new local levy known as the poll tax or council tax prompting rampaging riots in London's Trafalgar Square. She resigned that November after a leadership challenge by her former colleague Michael Heseltine. GBP/USD currently trading at $1.9946 as of 7:41 am, GMT.

The dollar has slipped 7.6 percent against the euro and 5.1 percent versus the yen in 2008 as the Federal Reserve cut interest rates to stave off a U.S. recession. Oil prices have doubled in the past 12 months, while gold is up 41 percent. Avoid the dollar ``at all costs,'' Rogers, chairman of Rogers Holdings, said in a speech in Shanghai today. ``The best investments in 2008 are commodities and natural resources. Agricultural prices have much higher to go over the next decade. We have a shortage of everything, including seeds.''

For all his talk of consensus, European Central Bank President Jean-Claude Trichet is having to acknowledge he can't please all of the people all of the time. A rare public division on his 21-member governing council is forcing Trichet to take sides, backing those who want to raise interest rates this week to curb inflation. Doing so may open an ever bigger rift by easing price pressures in Germany, Europe's biggest economy, at the expense of weaker neighbors. ``I don't remember such an explicit split at the ECB,'' says Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Group Plc in London. ``By lifting rates, the ECB will take unprecedented risks with growth.''

Today's Economic Events

Published on  Mon, Jun 30 2008, 12:45 GMT

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