Confidence among consumers has stuttered for the first time since the end of the Iraq war - and no one is sure why.

A study carried out by Martin Hamblin GfK on behalf of the European Commission found greater pessimism across a range of measures, including the general economic situation and personal finances.

Taking all the findings together, the study's headline consumer confidence index for August fell to minus three from minus one in July.

That was despite a steady recovery in the performance of the index since April and in the face of a further improvement in the FT-SE 100 Index during August.

The survey found perceptions over the general economic situation in the UK had decreased for the third month in a row to minus 15.

Expectations for the future of personal finances have also dropped from a score of plus 12 in July to plus nine this month, with the climate for making major purchases weakening three points to plus 19.

The slip in consumer confidence came as a surprise to economists, who pointed out the headline index still remained some way above levels seen ahead of the outbreak of the conflict in Iraq.

Simon Rubinsohn, chief economist at fund manager Gerrard, said it was not clear what had caused the heightened pessimism over personal finances.

He added: "One possibility is the squeeze in the purchasing power of households, resulting from both relatively modest wage gains and the tax hikes, is starting to have an impact on sentiment."

In other research, investors' confidence has fallen slightly during the past month but two-thirds of people still expect the FTS-E 100 to hold onto its recent gains.

A third of investors expect the stock market to continue increasing during the next six months, although this is down on the 40 per cent who were optimistic in July, according to JPMorgan Fleming Asset Management.

Friday August 29, 2003