First blows hit US economy

Economists have long warned that a protracted war is likely to have a significant impact on the global economy and the US in particular.

But new research suggests that the US economy is already suffering just 13 days after war began.

Manufacturing activity slumped in March, according to the Institute for Supply Management, breaking the recovery trend seen over the past four months and dashing hopes of a sustained turnaround.

Consumer activity was also lower in the first full week of the war, as consumers stayed away from shopping malls.

Sales at US retail chain stores fell by 1.4% in the week ending on 29 March, taking retail sales to their lowest point so far this year, according to research from investment bank UBS Warburg.

Lasting gloom

But according to ABC News/Money Magazine's Consumer Comfort Index, US consumer confidence increased slightly last week.

In spite of the increase, the index is still not far off from nine-year lows.

The report said anticipation of a conflict in the Gulf turned out to be a bit more worrying than the start of the war.

Over the last month the index turned in its worst four-week performance since December 1993, as consumers worried about the war, the economy and rising energy prices.

Carmaker Ford, meanwhile, reported that sales in March fell 8% as customers steered clear of making big investments with so much financial insecurity in the air.

Its rivals, General Motors and DaimlerChrysler, both said sales were down about 3% during the month.

And the National Retail Federation cut its forecast for retail sales growth by nearly a third, predicting that spending will increase at the slowest rate in at least a decade.

Such surveys are closely watched by investors and add to the existing gloom on the world's stock markets.

Despite the raft of gloomy data, economists still say the downturn could be a temporary blip if the war ends quickly.

"The problem is that a quick resolution to the war now looks increasingly unlikely," said Ken Wattret at BNP Paribas.

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