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House price growth slumps amid uncertain economic outlook

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UK house prices grew at an annualised rate of 0.5% in December, the slowest pace since 2013, according to data from Nationwide Building Society.

It said that economic uncertainty was undermining confidence in the market. London has had a poor year according to most surveys and Nationwide confirmed that London and surrounding areas saw a small fall in prices in 2018.

Other area saw substantial gains, with Northern Ireland prices up by 5.8% on an annualised basis, a 4% increase in Wales and 1% in Scotland. In England, the average increase over the year was 0.7%. Brexit worries and an uncertain economic outlook were said to be to blame.

A survey by the British Chambers of Commerce said that the UK services sector suffered its weakest sales growth in two years, and that manufacturers were having trouble recruiting qualified workers because of worries about Brexit.

The BCC's economic survey for the fourth quarter of 2018 said Brexit concerns led to a slowdown as consumer spending was suppressed because people were worried about leaving the EU without a deal.

“The UK economy is in stasis. While it’s not contracting, it’s not growing robustly either” said BCC director general Adam Marshall. The survey reported that 81% of manufacturers that tried to recruit had difficulties in finding skilled staff. In the services sector, the figure of 70% was close to the record of 72% in the previous quarter.

The UK construction sector also slowed in December, according to the latest Markit/CIPS UK construction PMI. Its index fell to 52.8 from 53.4 in November, remaining above the crucial 50 level that separates contraction from expansion, but was still below analysts’ forecasts. The commercial building sector was particularly badly hit.

The UK manufacturing sector benefitted from a rash of stockpiling in December as customers prepared for a no-deal Brexit and the delays to imported goods that are expected to arise as a result. The IHS Markit survey of purchasing managers in the manufacturing sector came in at 54.2 in December, its highest for six months and up from 53.1 in November.

However, Rob Dobson of IHS Markit said that “Any positive impact on the PMI is likely to be short-lived, as near-term gains are reversed later in 2019 when safety stocks are eroded or become obsolete.” Businesses reported the second-strongest rate of stockpiling since the survey began in 1992.

Meanwhile, China’s manufacturing sector is also suffering, sending shockwaves around world stock markets as investors are already worried about a slowdown in global growth. The Caixin IHS Markit Purchasing Managers' Index slipped from a reading of 50.2 for November to 49.7 in December. The reading below 50 means the sector is now contracting for the first time since May 2017. New export business declined again, but at a slower rate than in November.

"The fall in year-on-year growth of the producer price index is likely to accelerate," said Dr Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group. "In general, China's manufacturing sector faced weakening domestic demand and subdued external demand in December." The Shanghai Stock Exchange's Composite Index fell by 1.1%.

 

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Important Notes:

Main source of information: Company Report and Accounts, Bloomberg

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