Confidence dwindles as recession looms

By Jennifer Hill

LONDON (Reuters) - Investors and the general public believe a recession is the biggest threat to their financial well-being and are consequently saving more and spending less, a survey said on Friday.

More than a third of active investors believe a recession is the biggest threat, while 26 percent are most concerned about a stock market crash, according to the Association of Investment Companies' (AIC) latest investor confidence index.

The public mirrors that sentiment, with one in five saying their greatest financial fear for the next six months is a recession, while 17 percent worry about an interest rate rise.

As a result, 26 percent of active investors and 28 percent of the public are reeling in spending and saving more to protect themselves from an economic downturn, the survey found.

Yet almost three quarters of investors and more than half of the general population say the credit crunch has not changed their spending or saving habits.

A further 70 percent of the general public do not plan to use their individual savings account allowance this year.

The vast majority of investors, meanwhile, plan to increase their stock holdings in the coming months because they believe that market volatility has presented buying opportunities.

Around 16 percent plan to reduce holdings, about a third of whom would do so in the event of a recession.