UK service sector rebounds as workers quit for higher wages; Home Prices Continue To Rise – Business Live | Business
Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.
UK house prices have reached new highs, despite the prospect of a Bank of England interest rate hike in response to rising inflation.
Lender Nationwide reports that the price of an average home rose 0.7% in October, down from 0.2% in September, extending the price spike since the first Covid-19 lockdowns ended last year.
The annual growth rate remained high at 9.9% in October, slightly below 10% a month earlier.
This means the average house price has risen by more than £ 30,000 since the pandemic struck in early 2020.
This increases the price of a typical UK house over the £ 250,000 for the first time on Nationwide’s index (although larger land register data showed the average UK house price to be £ 264,000 in August).
Robert gardner, at national scale chief economist, said housing demand remained strong, despite the stamp duty holiday ending at the end of September.
Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019. Combined with a lack of housing in the market, this helps to explain why the growth pricing has remained robust.
Gardner warns, although the outlook remains “extremely uncertain” as the government withdraws some of the support for the pandemic such as the job retention program (which ended a month ago).
If the labor market remains resilient, conditions could remain fairly favorable over the next few months, especially as the market continues to gain momentum and it is possible that changes underway in housing preferences in the near future. the aftermath of the pandemic continue to support activity.
“However, a number of factors suggest that the pace of activity could slow down. It is still unclear how the economy as a whole will react to the withdrawal of government support measures.
Consumer confidence has weakened in recent months, in part due to a sharp rise in the cost of living.
The bank of england will announce tomorrow if it raises UK interest rates from their current record high of 0.1%, with some policymakers fearing inflation will exceed 4% (double its target) in the coming months.
Also coming today
Investors around the world are bracing for tonight’s Federal Reserve meeting. The US central bank is expected to set the timetable to slow the pace of its stimulus program to buy bonds, in response to rising inflation and a recovery in the job market.
The Fed is currently injecting $ 120 billion per month into the US economy by purchasing government bonds (treasury bills) and mortgage-backed securities; and could start to “cut back” on those purchases by buying less each month.
Adam cole, Chief Currency Strategist at RBC Capital Markets, says:
In what might be the best (and longest) policy change announced, the FOMC will announce a cut at the next meeting. Our economists expect the Committee to start with a cut of $ 10 billion in treasury bills and $ 5 billion in MBS.
As the Fed suggested, at this rate it would end around the middle of the year. Of course, the reduction will come with all the caveats one might expect: the Fed reserves the right to adjust the pace based on economic conditions, etc. But we also note that this flexibility can work both ways, with the ability to decrease faster for an earlier ending if the data points that way.
Don’t be surprised to hear Powell say at the press conference (if not inserted in the statement) that while “substantial further progress” has been made on reduction, there is a different set of criteria. for nebulous terms to reach as it concerns hiking.
We also find out how service companies in the UK, Eurozone and US fared over the past month.
- 9am GMT: Eurozone services PMI for October
- 9:30 am GMT: UK services PMI for October
- 12:15 GMT: ADP survey on the payroll of the American private sector
- 2 p.m. GMT: US services PMI for October
- 6 p.m. GMT: US Federal Reserve rate decision
- 6.30 p.m. GMT: US Federal Reserve press conference