It has been a week of largely downbeat news, with Brexit continuing to undermine confidence in many parts of the UK economy. Two surveys this week revealed a sharply declining housing market. On Tuesday, UK Finance, which represents the banking sector, said that mortgage approvals had fallen to their lowest levels in six years as confidence drained away and fewer homes were being put up for sale.
On Friday, Nationwide’s House Price Index showed UK prices virtually stalled in March, rising at an annual rate of 0.7% nationally, but falling by 3.8% in London compared to a year earlier, the worst performance in a decade.
Two further surveys revealed the downbeat mood of UK consumers. The Confederation of British Industry (CBI) Industrial Trends Survey showed retail sales falling sharply in March, with Brexit blamed for dampening spending. The survey found 23% of firms saw rising sales in March while 46% reported falling sales. The results represented the fastest contraction in sales in 17 months. March is now the fourth consecutive month where sales have not grown. On Friday, the respected GfK Consumer Confidence Index produced a downbeat reading of -13 for March, deteriorating from a reading of -7 a year ago. The European Commission also produces a UK version of the data which is seasonally adjusted. On this basis, consumer confidence is at its lowest level since 2013.
GDP data for the last quarter of 2018 was revised up in the UK on Friday. The Office for National Statistics (ONS) said that while the economy still grew by 0.2% in the fourth quarter, the annualised rate of growth for 2018 was revised up from 1.3% to 1.4%, still the weakest reading since 2012 and down from the 1.8% growth achieved in 2017.
Meanwhile in the US this week, GDP growth for 2018 was revised down in the fourth quarter, from 2.6% to 2.2%. That reduced the annual pace of growth in the world’s largest economy to 2.9%, still the strongest since 2015. The news came after bond yields earlier in the week flashed warning signs of a US recession, which sent share markets in the US and Asia tumbling.
Other indicators of sentiment and business conditions in the UK this week were also disappointing. On Monday, a survey by the CBI and PwC found confidence within the City of London was deteriorating at the fastest rate since the financial crisis. More than half of the firms surveyed said that they were less optimistic about the overall business situation in the City than they were three months ago. The survey index reading of -43% is a sharp decline from the previous quarter’s reading of -24%, the steepest since 2008. Additionally, a survey released on Wednesday by the Recruitment and Employment Confederation, said employers are scaling back hiring and investment plans as the ongoing Brexit uncertainty erodes confidence. The trade body said that employers’ confidence in British economic prospects had dropped by eight percentage points in March compared to February, to its lowest level since the survey began. Confidence in hiring and investment decisions at employers’ own firms fell into negative territory for the first time since the EU referendum in 2016.
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