TheNews THE ECONOMY
No change in interest rates for foreseeable future
The double dip recession has led economists and financial experts to predict that the base interest rate will remain at the record low level of 0.5 per cent until 2014 and that it may not rise for another three to five years, despite March’s shock rise in inflation. The Consumer Price Indices
(CPI) rose from 3.4 per cent to 3.5 per cent, which although small is significantly higher than the Government’s target rate of two per cent. This prompted speculation that the Bank of England Monetary Policy Committee (MPC) might raise interest rates in an attempt to curb inflation. But economists and financial experts are doubtful there will be sufficient improvement in the UK economy to enable the MPC to raise interest rates before the end of 2013 at the earliest. The fact that
Robert Gardner
there is so much volatility in economic data to enable the MPC to gauge
accurately the strength of the economy means that experts are predicting that interest rates will stay the same. Many believe that this will be exacerbated in 2012 by the Olympics and the Diamond Jubilee.
THE MARKET House prices show a modest rise
The Office of National Statistics (ONS) figures show that the typical house price was £224,473 in February, a 0.3 per cent year-on-year rise but first-time buyers have seen prices increase by 1.3 per cent. In the year to February 2012,
average house prices increased in both England and Scotland by 0.4 per cent and 1.1 per cent respectively. Increases in London of 1.7 per cent and the South East of 1.2 per cent were offset by drops of –9.7 per cent. Northern Ireland and –0.5 per cent in Wales. Adam Challis, head of research at Hamptons
6 l June 2012 l TheNegotiator
International said, “This period of relative economic stabilisation has created opportunities for property buyers to take advantage of realistic pricing and very attractive mortgage rates. The supply of housing for sale in London and the South of England has improved by six per cent since the start of the year.” Prices of new homes rose by 7.7 per cent
Adam Challis
during the 12 months to February 2012, while the price of pre-owned dwellings decreased by 0.2 per cent. Average mix-adjusted house
prices in February 2012 stood at £232,485 in England, £151,839 in Wales, £177,354 in Scotland and £136,263 in Northern Ireland. Excluding London and the South East, the average UK mix-adjusted house price was £182,742. London continues to be the English region with the highest average house price, at £366,435 in February 2012. The North East has the lowest average house price, at £138,157.
THE ECONOMY Consumer confidence is up
Nationwide Building Society, in conjunction with TNS-RI, has released its Consumer Confidence Index for March 2012 and it shows that confidence among consumers is on the up. The main Confidence
Index increased by nine points to 53, a nine month high and seven points higher than at that time last year. However, the main Index remains 23 points below its long run average of 76. More than a quarter (26 per
cent) of respondents considered this to be a good time to make major purchases, the highest reading for ten months, though 41 per cent disagree. Robert Gardner,
Robert Gardner, chief
economist at Nationwide building society explains, “The Bank of England will want to make sure the economy is really gaining momentum before it risks raising interest rates.” He adds that the Bank of
England has previously made clear it would only respond to high inflation by raising interest rates if the problem was caused by domestic issues, but the factors currently driving inflation – fuel, energy and food prices – are global issues.
Nationwide’s chief economist says: “Much of the survey- based data has painted a more upbeat picture of the UK economy than official data in recent months. The main Index jumped nine points in March, which is at odds with the challenging economic backdrop, with the UK economy tipping back into recession in the first three months of the year. “The consumer confidence
Index has been fairly volatile from month to month, but since reaching an all-time low in September last year the trend has generally been towards increased confidence. It may be that the general decline in inflation from the recent highs of 5.2 per cent last September to 3.5 per cent in March has helped to support spending power and lift consumers’ spirits over the past six months.” However, with the slow
economy, the improvement in confidence may be short-lived. “The sharp falls in inflation seen at the start of the year are unlikely to be repeated in the near–term, with inflation likely to fall back towards the 2 per cent target slowly. As a result, the easing price pressures will be less visible to households in the months ahead than at the start of the year,” he says.
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