Western economies are in the balance following last week's terrorist attack on the United States, according to an Oxford think tank.

Oxford Economic Forecasting has attempted to model some of the possible effects on consumer confidence, on stock markets, and on oil prices.

They acknowledge that all estimates are highly speculative but suggest that the catastrophic events could knock 0.5 percentage points off global output next year.

That would spell a weaker upturn from the present economic doldrums, but still a recovery.

However, in a research note the economists add: "The terrorist attacks on the United States could be the straw that breaks the camel's back, tipping the US and perhaps the rest of the world into outright recession."

Adrian Cooper, of Oxford Economic Forecasting, told the Oxford Mail: "The economy was already weak before this attack."

He added: "Latest figures on consumer spending in the US and here suggest a fall-off in consumer spending, but it is too soon to judge.

"After the death of Princess Diana there was a downturn and then a recovery. I think this disaster might have only a limited impact on spending long term."

**The engineering sector recession has deepened in the UK, according to figures from the Office for National Statistics.

A sharp fall in overseas orders pushed engineering industry turnover down 6.6 per cent in the three months to the end of July. Turnover is now 5.6 per cent below the same period last year.