Showing posts with label UK Economy. Show all posts
Showing posts with label UK Economy. Show all posts

Mar 2, 2021

News | UK Economy | Real Estate: UK Housing Prices Jumped and Hit a New Record High.

UK house prices see 'surprise' pick-up, says Nationwide

BBC News

Couple looking at housing in estate agent in masksimage copyrightNathan Stirk

House price growth rebounded last month with the average value hitting a record high of £231,068, according to the Nationwide.

Prices were up 6.9% from a year before, compared with 6.4% in January, it said.

"This increase is a surprise," said the Nationwide's Robert Gardner, as price growth had been expected to slow ahead of the end of the stamp duty holiday.

The holiday is due to end on 31 March although there have been reports it could be extended.

The stamp duty holiday means the tax has been suspended on the first £500,000 of all property sales in England and Northern Ireland since July.

There has also been some relief from the equivalent taxes for property buyers in Scotland and Wales - which is also set to end on 31 March.

An announcement on any changes in stamp duty could come in this week's Budget.

A mortgage guarantee scheme to help people with small deposits buy a property ladder is set to be announced in the Budget.

The government will offer incentives to lenders, bringing back 95% mortgages which have "virtually disappeared" during the pandemic, the Treasury says.

House price chart Feb

The Nationwide said house prices rose by 0.7% month-on-month, after taking account of seasonal effects, reversing the 0.2% monthly decline recorded in January.

However, it added that the outlook for the housing market was particularly uncertain right now, and the market could slow because of the employment situation. Many workers remain on furlough, and some of those jobs may not return.

Rival lender the Halifax said last month that the economic realities of 2021 meant activity would slow as the year progressed.

Mr Gardner, Nationwide's chief economist, said: "It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present.

"Shifts in housing preferences may also be providing a more significant boost to demand, despite the uncertain economic outlook.

"Many peoples' housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook."

'Flight to safety'

Samuel Tombs, economist at Pantheon Macroeconomics consultancy, said he had been forecasting a fall in house prices this year, but the Nationwide numbers have prompted a rethink.

"Our forecast for house prices to drop by about 2% this year now looks too downbeat, though we'll wait for details of the guarantee scheme to be released before providing new numbers."

However, Anna Clare Harper, chief executive of asset manager SPI Capital, said: "Reduced stamp duty is not the only driver of house price growth since the strictest lockdown conditions were removed in 2020.

"We also have cheap debt as a result of very low interest rates, which gives buyers a 'discount'; the release of pent-up supply and demand and desire to improve surroundings amongst existing homeowners.

"There is also the 'flight to safety', since in times of uncertainty, people want to put their money in a stable asset with low volatility. These trends are likely to hold up throughout 2021."

Feb 26, 2021

News | UK Economy | Inflation Rate: Inflation Rate in UK may have to rise sooner in order cope with the inflation rate in progress.

Rates may have to rise sooner to tame inflation threat, says Bank economist

Larry Elliott

Central bank complacency risks letting the “inflation tiger” out of the bag, a senior Bank of England policymaker has said.

Adding to market jitters about the resurgence of price pressures as the global economy recovers from the Covid-19 pandemic, Andy Haldane said borrowing costs could need to go up sooner than the City expected to tame the inflationary threat.

Threadneedle Street’s chief economist – who has been the most optimistic of the nine members of the Bank’s rate-setting monetary policy committee – said the low-inflation era of the past few decades may be coming to an end.

Other MPC members believe rising unemployment and business failures will ensure that inflation remains close to its official 2% target in the coming years, but Haldane said a smaller workforce, the retreat from globalisation, the stimulus provided by central banks, and the boost to consumer spending generated by running down savings would combine to push up the cost of living.

“Inflation is the tiger whose tail central banks control,” Haldane said in a speech. “This tiger has been stirred by the extraordinary events and policy actions of the past 12 months. It is possible that, as vaccinations are rolled out and some degree of normality returns, inflation will return to a stable state of rest. Indeed, if risks from the virus or elsewhere prove more persistent than expected, disinflationary forces could return.

“But for me there is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets. People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But for me the greater risk at present is of central bank complacency allowing the inflationary big cat out of the bag.”

Interest rates – or yields – on government bonds have risen this week as investors have demanded greater insurance against the risk of inflation. Haldane recently said in a newspaper article that the economy was like a “coiled spring” ready to go off, and his comment that the risks to inflation were skewed to the upside pushed the pound higher on the currency markets. He said there were “good grounds” for believing future inflation could behave very differently than in the past.

The MPC’s collective position is that policy will not be tightened until there is clear evidence that the economy has made up the ground lost during the pandemic and the inflation target has been sustainably met.

Haldane said: “My judgment is that we might see a sharper and more sustained rise in UK inflation than expected, potentially overshooting its target for a more sustained period, as resurgent demand bumps up against constrained supply.”

Financial markets globally had recently begun pricing in this possibility, he added.

Nov 5, 2020

News | Business | UK Economy | Banking: Bank of England injects extra £150bn into economy


2-3 minutes - Source: BBC

Sterling notesimage copyrightGetty Images

The Bank of England will pump an extra £150bn into the economy as it warned the resurgence of Covid-19 will lead to a slower, bumpier recovery.

Tighter lockdown rules, including new restrictions in England, are expected to push the UK into another downturn.

While it is expected to avoid another recession, the Bank believes unemployment will rise sharply as government support schemes wind down.

Policymakers also kept interest rates on hold at a record low of 0.1%.

The Bank expects the economy to shrink 2% in the final three months of 2020, before bouncing back at the start of 2021, assuming current restrictions loosen.

Interest rate graphic

It does not expect the UK economy to get back to its pre-virus size until the following year.

Peak unemployment

Policymakers expect the economy to shrink 11% in 2020.

Unemployment is expected to peak at 7.75% in the middle of next year, which would be the highest rate since 2013.

Presentational grey line

The Bank of England is in charge of the UK's money supply - how much money is in circulation in the economy.

That means it can create new money electronically and the Bank spends most of this money buying government bonds through a process known as quantitative easing (QE).

QE is sometimes described as "printing money" but in fact no new physical bank notes are created.

Government bonds are a type of investment where you lend money to the government. In return, it promises to pay back a certain sum of money in the future, as well as interest in the meantime.

QE graphic

Buying billions of pounds' worth of bonds pushes the price up: when demand for anything increases, the price usually goes up too.

Many loan interest rates offered by banks to businesses and individuals are affected by the price of government bonds.

So if those government bond prices go up, the interest rates on those loans should go down - making it easier for people to borrow and spend money.

Presentational grey line

This represents a deeper downturn, and slower recovery than predicted in August.

The Bank said its forecast reflected "heightened health concerns and uncertainty about the outlook".

Sep 17, 2020

News | Business | UK Economy: Bank of England warns of 'unusually uncertain' outlook, reveals negative rates under consideration


Elliot Smith

LONDON - The Bank of England on Thursday left interest rates unchanged and maintained its current level of asset purchases, but warned that the outlook for the economy remains “unusually uncertain.”

All members of the Monetary Policy Committee (MPC) voted to keep the main lending rate at 0.1%, with the central bank having cut rates twice from 0.75% since the beginning of the pandemic. The MPC also voted unanimously to maintain target for the total stock of its bond purchases at £745 billion ($960.8 billion).

The Bank of England also revealed that the MPC had been briefed on the Bank’s plans to explore how a negative bank rate could be implemented effectively, meaning it is now openly considering how to use negative interest rates.

Sterling fell by around 0.6% against the dollar in the wake of the announcement.

Britain faces concurrent risks of a no-deal Brexit, a spike in coronavirus cases leading to the reintroduction of some social restrictions, and the end of the government’s furlough scheme next month, which had supported millions of dormant workers during the pandemic.

After plunging a record 20.4% in the second quarter to officially enter recession, the U.K. economy saw signs of recovery with a 6.6% monthly expansion in July, after nationwide lockdown measures were gradually lifted.

However, a spike in cases to more than 3,000 per day has forced the government to implement new rules on social gatherings and implement localized lockdowns in certain regions, casting doubt over the country’s recovery.

“The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year,” the Bank said in its summary.

It added that there remains a risk of a “more persistent period of elevated unemployment than in the central projection.”

Despite stronger-than-expected domestic economic data in recent months, the central bank said the economic outlook remains “unusually uncertain,” as its central assumptions include a free trade deal with the European Union coming into effect on January 1 and a gradual dissipation of the impact of Covid-19.

The MPC also said it does not intend to tighten monetary policy until there is “clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

‘Unenviable choice’

Vivek Paul, U.K. chief investment strategist at BlackRock Investment Institute, said the employment figures to date do not tell the full story given recent headlines about the amount of British firms considering redundancies, and expects the headline unemployment figure to rise “materially” in the fourth quarter.

“The global policy revolution, where central banks and governments have taken unprecedented measures to support economies and of which the UK’s furlough scheme is a prime example, has been the bedrock of the strong risk-asset rally in recent months — but the potential for premature withdrawal of stimulus is a big risk to markets and the economy,” Paul said.

“The Bank of England and the U.K. government face the unenviable choice between either being accused of premature policy withdrawal, or having extended stimulus to the point that it becomes incredibly difficult to unwind in future.”

He added that if Brexit talks collapse or Covid-19 cases rise significantly through the winter, calls for further intervention will become stronger.

Negative rates back in play?

Giles Coghlan, chief currency analyst at HYCM, anticipates that negative rates could be seen in February 2021.

The Bank now projects that third-quarter GDP will be around 7% below the level seen in the fourth quarter of 2019, slightly stronger than previously expected.

“With Brexit risks ahead the Bank of England face further possible headwinds. They said that investment intentions remain very weak and uncertainties among businesses were elevated,” Coghlan said.

“All in all, this is a Bank preparing for tough days ahead, especially as job redundancies could rise to 735,000 this year according to the Institute for Employment Studies after a Freedom of Information request obtained by the BBC.”

Aug 11, 2020

News | Business | Economy | UK | Retail Sales: Retail sales rise despite fewer High Street visits

6-7 minutes - Source: BBC

Woman walks past high-end fashion stores Image copyright Getty Images
Retail sales rose again in July, but shops are still trying to make up lost ground, industry body figures suggest.
They show the number of visits to High Streets is still down significantly as people shop online instead.
The British Retail Consortium (BRC) said some retailers continue to struggle due to the coronavirus crisis, and it made a fresh call for government help with rents.
The housing ministry said landlords and tenants should "find solutions that work for both parties".
Retail sales rose for the second consecutive month in July, the BRC said, up 3.2% compared with the same month last year. But the picture for retailers was mixed.
Food sales continued to be strong, while furniture and homeware sales also did well as people "increasingly invest in their time at home", the BRC-KPMG retail sales report found.
Online shopping remained "prominent" in July, accounting for 40% of sales, said Paul Martin, UK head of retail at KPMG. Computer sales also continued to soar as people who could worked from home, he said.
Food and alcohol sales slowed but drink sales still made a significant contribution to supermarket growth, Susan Barratt, the chief executive of grocery research organisation IGD said.
And while local coronavirus lockdowns in the north of England had taken a toll on consumer confidence in the region, morale was higher in Scotland, she said.

Confidence question

But many British shops, particularly in fashion, jewellery and beauty, are "still struggling to survive," BRC chief executive Helen Dickinson said.
"While the rise in retail sales is a step in the right direction, the industry is still trying to catch up lost ground, with most shops having suffered months of closures.
"The fragile economic situation continues to bear down on consumer confidence, with some retailers hanging by only a thread in the face of rising costs and lower sales," she added.

KPMG's Mr Martin said that while the return to school in September traditionally drove higher sales volumes, the unwinding of the government's furlough scheme could make consumers less willing to spend.
And new data from credit card company Visa suggests that consumer confidence has been further knocked by difficulties getting a refund.
It shows that more than one in 10 people who have requested a return for items and services bought during the coronavirus lockdown are yet to get their money back.
Meanwhile, more than a third say they are avoiding making a big purchase over fears their money would not be returned if they needed a refund.

Footfall fall

One major concern for many shops was footfall continuing to be down, "with many people still reluctant to go out, and fewer impulse purchases", Ms Dickinson said.
Separate figures from market intelligence firm Springboard suggested a 40% drop in footfall in the month, which was still an improvement from June, and the best month since February.
Online spending is unlikely to decline, while a lack of tourism, more people working from home, and rising unemployment were all factors keeping people away from shops, it said.
But there was one bright spot for High Streets. Springboard figures for the beginning of August suggest footfall rising during the government's Eat Out to Help Out scheme, which lets restaurant diners get up to 50% off their food and soft drink bills Monday to Wednesday.
However, according to the Centre for Retail Research, more than 22,000 UK restaurant jobs have been cut so far in 2020 and nearly 1,500 restaurants and outlets closed.

Rent cut call

On Tuesday the BRC repeated a call for a government grant to help pay rents, saying retailers were "struggling".
"Next quarter rent day could see many otherwise viable businesses fall into insolvency, costing stores, jobs and economic growth," Ms Dickinson said.
On Monday the BRC and a number of industry bodies, including UKHospitality, which represents restaurants and pubs, called for a so-called "Property Bounceback Grant".
The groups, including landlords, called for the government to pay 50% of retail, hospitality and leisure rents for six months, at a cost of £1.75bn to the Exchequer.
The industry bodies claimed that this would generate tax revenue from economic activity of almost £7bn, and save 375,000 jobs.
In a joint statement, they said landlords have been "walking a tightrope to support their customers and protect the pensions and savings of millions of people invested in commercial property across the country".
The Ministry of Housing, Communities & Local Government said that government support was already available for landlords, and that there was a moratorium on landlords being able to evict commercial tenants for non-payment of rent until 30 September.
There were also temporary measures to protect businesses from "aggressive" rent recovery, it added.
"We recognise the huge challenges being faced by commercial tenants and landlords during this period, which is why we're working closely with them to ensure they are supported and would urge both landlords and tenants to follow the example of others and find solutions that work for both parties," the housing ministry said.
"The government has taken unprecedented action to protect jobs and livelihoods, with a package of around £160bn of support, including loans, rates relief and grants for businesses to support them through the pandemic."

Aug 6, 2020

News | Business | UK Economy: Bank of England tempers forecasts for UK economic rebound

Delphine Strauss 

The Bank of England has tempered its previous prediction that the UK economy would rebound swiftly from the recession caused by the coronavirus crisis, saying on Thursday that GDP would not exceed pre-pandemic levels until the end of 2021.
The Monetary Policy Committee left interest rates on hold at 0.1 per cent with its target for the total stock of its asset purchases also unchanged at £745bn.
It said the initial hit from lockdown measures had not been quite as severe as it had projected in May, although it expected output to be more than 20 per cent lower in the second quarter of 2020 than it had been in the final quarter of 2019. A strong recovery in some areas of consumer spending is expected to drive a rapid rebound over the coming months.
The pound rose 0.4 per cent against the US dollar to $1.3160 after the decision, its highest level since the turmoil in March as coronavirus concerns raced through markets.
The MPC was also more optimistic about the outlook for unemployment than it had been in May, predicting the jobless rate would peak at about 7.5 per cent at the end of this year before declining gradually.
Consumer price inflation was expected to fall further below target, averaging about 0.25 per cent in the latter part of the year, and to be around the MPC’s 2 per cent target in two years.
However, in its guidance the MPC emphasised that the balance of risks to its forecasts lay very much to the downside, and said it would not tighten monetary policy “until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2 per cent inflation target sustainably”.
The BoE forecast the recovery would slow dramatically after the third quarter of 2020, reflecting consumers’ continued concerns over health risks and fears over job security. By the end of this year, GDP is expected to remain 5 per cent below its pre-pandemic peak and only to regain its pre-crisis level at the end of 2021.
Even by the end of 2023, when the forecast period concludes, GDP would remain 1.5 per cent below its pre pandemic trajectory, according to the bank. This long-term scarring is because business investment and start-up activity is expected to remain weak, weighing on productivity.
The bank’s Financial Policy Committee said companies continued to face a severe cash-flow shock, with many likely to need further finance to survive the disruption. It predicted that if the economy followed the path set out in the BoE’s central projections, companies could face a cash-flow deficit of up to £200bn in this financial year.
But the FPC said that even with corporate insolvencies set to rise, UK banks’ capital buffers were more than sufficient to absorb losses — unless the loss of output, and the unemployment rate, were double that in the MPC’s central projection.

Jul 1, 2020

News | UK Economy: House prices 'fall for first time in eight years'

By Kevin Peachey Personal finance reporter

For sale signs in London Image copyright Getty Images
UK house prices were 0.1% lower in June than the same month a year ago - the first annual fall since December 2012, according to the Nationwide.
The building society also said property values had dropped by 1.4% compared with May as the coronavirus lockdown hit the housing market.
Sales plummeted and viewings halted when the sector was effectively frozen.
The Nationwide said the magnitude of the shock to the economy made a house price fall unsurprising.
It said the outlook for the housing market was "highly uncertain" in the coming months.
The housing market, as with the rest of the economy, has been hit hard by the coronavirus pandemic. The lockdown meant activity slowed sharply, with sales at half the levels of a year earlier.
The Nationwide, which bases its figures on its own mortgage lending, said that house prices, on an annual basis, dropped from a 1.8% rise in May to a 0.1% fall in June as the effects of the shutdown were felt. The typical home was now worth £216,403, it said.
Viewings, sales and moves have now resumed in much of the UK, but buyers and sellers face fresh unease about job and income prospects, prompting some to rethink plans over property.
"With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels. Nevertheless, the medium-term outlook for the housing market remains highly uncertain," said Robert Gardner, Nationwide's chief economist.
He said that government measures to support the economy and jobs would dilute the potential impact of the pandemic on the housing market.

What next?

Prices in April, May and June were lower than the previous three months in Wales (down 2.2%) and Northern Ireland (down 0.5%) compared with rises in Scotland (up 2.5%) and England (up 0.4%), the Nationwide said. These figures can be relatively volatile owing to the relative lack of data in some areas.
Commentators said the rest of the year could be a test for the housing market.
"The property market was never going to get through such a profound economic shock without taking a material hit," said Andrew Montlake, managing director at mortgage broker Coreco.
"The second half of 2020 is going to be the real test for the property market, as government support for workers is slowly removed and we see a rise in unemployment. The government and Treasury are going to be tested like never before as they seek to keep people in jobs, which will clearly be pivotal to the future direction of house prices."

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