Fears of recession grow as UK consumer morale sinks

There were growing fears that the UK is heading back into recession on Thursday as a survey showed consumer confidence fell to a record low last month and British Gas owner Centrica issued a profit warning. There was more grim news from UK retailers with a dismal first-half update from mother and baby products retailer Mothercare and a profit warning from fashion retailer French Connection.
--- Surprise rise in retail sales, but discount driven Official retail sales for October came in better than expected but were driven by discounts to lure in cash-strapped Britons. Nationwide's consumer confidence index dropped to 36 in October from 45 in September, the lowest since the survey began in May 2004. "A wave of disappointing economic news at home and ongoing uncertainty surrounding the Euro crisis have dealt a heavy blow to sentiment," said Nationwide's chief economist Robert Gardner.
Britons have been feeling the pinch as disposable incomes are squeezed by rising prices, muted wage growth and government austerity measures, and as they worry about a stagnant housing market, job security, a fragile economic recovery and the eurozone debt crisis. On Wednesday, the Bank of England slashed its growth forecast for next year and flagged it may have to pump even more cash into the economy than the additional 75 billion pounds ($118 billion) of quantitative easing it launched in early October.
Centrica, whose British Gas unit is the UK's biggest household energy supplier, said customers were shopping elsewhere following price hikes and using less electricity and gas due to economic uncertainty and warmer weather. It warned 2011 earnings would be marginally lower than current market expectations and its shares fell 2.1 percent. Mothercare said it had launched a fresh review of its 352-store British business after it plunged to a first half loss and slashed its interim dividend.
It said UK shoppers were shying-away from relatively big ticket purchases, such as pushchairs and car seats, and its shares slumped 11 percent. Elsewhere on the high street French Connection warned on full year profit after third quarter sales and profit undershot expectations. Its shares lost more than 18 percent. And in the most recent snapshot of high street sentiment John Lewis, the UK's largest department store group, said sales fell 0.6 percent from Sunday November 13 to Wednesday November 16.
On Wednesday video games retailer Game became the first British high street stores group to warn on profit during the run-up to Christmas. However, pre-Christmas promotions gave a surprise lift to British retail sales in October, driving up volumes at their fastest pace since June, official data showed. The Office for National Statistics said sales volumes including automotive fuel rose 0.6 percent last month after a 0.5 percent rise in September and confounding forecasts for a fall of 0.2 percent.