Tag Archives: Economy

Good News – GDP has grown by 1.9% in 2013 Landlord News, Latest Articles

The Office for National Statistics (ONS) has this morning reported the UK economy has grown by 0.7% in the fourth quarter of 2013 with total GDP for the year growing by 1.9%.

These are the best annual growth figures since 2007 (recorded at 3.4%) although we are still 1.3% behind the peak GDP figure in Q1 2008. We are therefore still recovering from the deepest recession in history in which GDP decreased by 7.2%.

GDP graph

 

The contribution an industry sector makes to GDP quarterly growth is dependent on its weighting to the economy with services contributing 77.8%, production 15.2%, construction 6.3% and agriculture
0.7%.

Construction output decreased by 0.3% in Q4 2013, following an increase of 2.6% in the previous quarter. Between Q4 2012 and Q4 2013, construction output increased by 4.5%. Growth figures in the construction industry although not greatly affecting the overall economy are a positive signal considering it is the lack of housing supply that is driving the price boom in London and parts of the South East.

The Office for Budget Responsibility recently revised its 2013 UK growth forecast from 0.6% to 1.4% and is currently forecasting growth of 2.4% for 2014, but if the economy continues recovering at its current pace this may yet have to be revised again.

The International Monetary Fund has also increased its growth forecast for the UK economy from 1.9% to 2.4% making us the fastest growing economy in Europe.

With GDP now nearly hitting the Bank of England target of 2% growth and inflation matching its target of 2% the recovery is within forecast plans, but still fragile due to foreign economic uncertainty. Mark Carney The Governor of the BofE has confirmed there is no pressure to increase interest rates above their current level.

I deliberately used the title Good News as I have already seen headlines by the press scaremongering without evidence over interest rates.


Bank of England Inflation report and what it means for Interest Rates House Prices, Latest Articles

dont panicUnlike the press DON’T PANIC, the economic news is good but not that good in the Bank of England Inflation report.

Reports of imminent Bank Base Rate rises next year are wildly exaggerated and unhelpful to the economy. We had one piece of good news on unemployment and the FTSE 100 took a tumble.

Let’s just start with the facts as CPI inflation is now down to 2.2% from 2.9% in June. This means we are much closer to the medium term targeted inflation than we have been since December 2009. The disclaimer in my previous article about the ONS CPI inflation data was that it did not include the recent energy price increases. However, I have since found out that these increases are actually smaller than at the same time last year so should have no effect on year on year figures.

If you strip out four of the big contributors to inflation: Education, Food, Fuels and Lubricants, Electricity, Gas and other Fuels     you will see that the Core underlying inflation is actually below target at about 1.4%. See table below

Bank of England inflation report

Unfortunately it has been a consumption lead recovery in the UK rather than production as we are sucking in exports from Europe quicker than we are able to expand our export trade to places like China. Hence we are running a trade deficit and not expecting a robust recovery like in the USA, because our increase in export trade has not been dynamic enough.

This can be seen in where the recovery is happening in house prices. London which is lead by the service industry and consumption has had house prices rising by 10% where the National average is 4.3%. The North where manufacturing industry has traditionally been based is seeing little or no increase in house prices dependent on the area.

The figures that got the press in a spin was the decrease in unemployment rates, because the Bank of England had indicated that it would only look at raising the interest rate if unemployment dropped below 7%. However even if it was below 7% now the recovery is not robust enough to even consider raising rates and it is expected that there will only be a 60% chance of unemployment dropping below 7% by the end of 2015. see chart to the right and below:

BofE unemploymet chart

The productivity gap where we were seeing an increase in private employment, but a much lower level of increase in output has now started to close which is good news, but to really see a long term sustainable robust recovery it is business investment that needs to increase so we can compete with emerging low cost markets.

The current figures do not show that corporate investment is increasing, but it does appear that this is changing and may be reflected in future data. Companies may be using their current reserves before seeking borrowing to invest in productivity

The GDP figures shown in the chart below are predicted to improve with growth at about 2 -2.5% per year, but this is within target for GDP without putting pressure on inflation levels or interest rates.

BofE GDP

Predicted future inflation rates inflation rates by  the Bank of England are pretty much spot on the targeted 2% level as seen below

BofE inflation

 

 

 

 

 

 

Overall the UK economy is in a much healthier position than it was a year ago, but stagnation in our main trading partners in Europe and lack of corporate investment and exports means we have little to worry about at the moment concerning an imminent boom and a need to increase interest rates before the end of 2015 or beyond on current projected figures.


Cameron veto may mean buy to let regulation by EU Buy to Let News, Cautionary Tales, Latest Articles, Mortgage News, Property118 News

Mortgage lenders are quietly furious behind the scenes that Prime Minister David Cameron’s Euro treaty veto may have scuppered their fight to block the regulation of buy to let loans.

As the dust settles on the UK’s lonely position standing in the kitchen looking on at the Eurozone party, buy to let could be one of the victims. Continue reading Cameron veto may mean buy to let regulation by EU


Your Property & Economic Predictions for 2012 landlord's log

Calling all landlords and associated property professionals

We all read the various pundits forecasts and they are nearly always wrong so I thought it would be interesting to see if Property118.com readers can predict any more accurately what will happen in 2012 than the professionals.

Please leave your considered guestimates in the comments section below and we will see who is the closest next year by creating an article about it in January 2013. Continue reading Your Property & Economic Predictions for 2012


EU Trying To Kill Buy To Let – sign the petition to STOP it now. Buy to Let News, Cautionary Tales, Latest Articles, Property Market News

The buy to let market will grind to a halt if EU proposals to change the way lenders hand out mortgages to landlords are approved, claim experts. Do not let this happen – sign the petition linked below.

The new rules will stop landlords buying new property to rent and restrict mortgage lending that will shrink the number of buyers and push house prices down.

This could put landlords and homeowners in to negative equity that would make selling homes impossible. Continue reading EU Trying To Kill Buy To Let – sign the petition to STOP it now.


Property Forum and News website where UK landlords and letting agents share best practice