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Inflation takes off on higher air fares and energy prices

UK inflation was higher in April, as the Easter getaway rush boosted air fares and the higher energy price cap was introduced.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) was 2.1% last month compared with 1.9% in March.

Economists had been expecting inflation to rise to 2.2%.

It is the first time in 2019 that the rate has risen above the Bank of England’s 2% inflation target.

Household bills were one of the main contributing factors to the higher rates, after increases to Ofgem’s energy price cap came into effect.

Electricity and gas prices rose 10.9% and 9.3% respectively between March and April.

Transport costs were also higher, especially for flights, due to the timing of Easter. Coming at the end of the month, the holiday helped to push air fares up by 26.4%.

But travellers also paid more for other forms of transport, with international rail, coach and sea fares all rising.

However the timing also contributed to a downward effect from hotels, where the cost of overnight stays rose by less than a year ago.

Meanwhile, drivers faced higher costs at the pumps as motor fuel prices rose.

ECONOMY Inflation
(PA Graphics)

Petrol prices rose by 3.8p on the month to 124.1p per litre. This was a bigger rise than the same time last year, when prices were up 1.5p.

Diesel was also pricier, climbing 2.3p to 133p per litre.

The largest downward contribution came from recreation and culture, especially in the volatile computer games category. Prices for games are calculated based on the bestseller charts, meaning they can vary depending on the number and popularity of new releases.

Prices in the games, toys and hobbies category were down 5.8% on the month, compared with a smaller decline of 1.6% last year.

(PA Graphics)
(PA Graphics)

Cigarettes and beer, especially cans of lager, also had lower prices. The wider alcohol and tobacco category was down 0.4%, despite a 2.1% uplift in the price of spirits.

The CPI, including owner-occupiers’ housing costs (CPIH) – the ONS’s preferred measure of inflation – was 2% in April, up from 1.8% in March.

The Retail Prices Index (RPI) was 3%, up from 2.4% in February.

Higher inflation would usually bring pressure on the central bank to raise interest rates – but these are far from normal times

Ben Brettell, Hargreaves Lansdown

Ben Brettell, senior economist at Hargreaves Lansdown, said the inflation rate had received a muted reaction from the markets, and may have little weight in the Bank of England’s decision on whether to raise interest rates.

“Higher inflation would usually bring pressure on the central bank to raise interest rates – but these are far from normal times,” he said.

“The MPC is rightly reluctant to tweak policy while Brexit hangs over the economy like the Sword of Damocles.”

Source: BT.com

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London house prices suffer UK’s steepest annual fall ahead of original Brexit deadline

House prices in London plunged 1.9 per cent in the year to March, the largest annual fall in the country, ahead of the UK’s original Brexit date.

UK-wide house prices jumped 1.4 per cent over the twelve months, but in London the average property price fell almost two per cent to £463,000, according to HM Land Registry figures.

Homes in the capital also fell 0.4 per cent month-on-month in March as the drop continued in the run up to the anticipated Brexit date of 29 March.

Despite the fall, the figures show an improvement on the 2.7 per cent annual drop to February.

Former RICS residential chairman and north London estate agent Jeremy Leaf said: “Once again, we are seeing London acting as a drag on the rest of the UK housing market as despite improvements in affordability, almost record low mortgage rates and unemployment, combined with a shortage of stock.

“With prices down one month, up the next – no real pattern has emerged.”

Chief executive of online estate agent Housesimple, Sam Mitchell, said the data provided a “distorted picture” as they were based on sales completed during peak Brexit chaos.

He said: “January and February, when offers would have been made for March completions, was approaching the eye of the Brexit storm.

“That uncertainty, and the political squabbling in Parliament, fed through to buyer and seller confidence, particularly in London and surrounding areas.”

He added: “The market has now settled down, and with the EU leave date extended to the end of October, we are expecting more buyers and sellers to take advantage of this Brexit limbo, and relatively calm market conditions, to proceed with sales and purchases.”

By Callum Keown

Source: City AM

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UK inflation rises in April by less than Bank of England expected

UK inflation rose last month by less than the Bank of England and investors had expected, but still hit its highest level this year, pushed up by a rise in energy bills.

Consumer prices rose at an annual rate of 2.1% in April after a 1.9% increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2%, the same as the BoE’s forecast.

Sterling and government bonds were little changed by the data as core inflation, which excludes energy and food prices, held steady at 1.8% for the third month in a row.

“In principle, this is another reason to think the Bank of England will keep rates on hold for the foreseeable future,” ING economist James Smith said.

But he added that a strong labour market meant an interest rate hike in November could not be ruled out.

A recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.

But Britain’s energy regulator raised a price cap on energy providers by 10% with effect from April, and all big six suppliers raised their standard prices by the same amount, which the BoE said would push inflation above target briefly.

Electricity and gas prices were the biggest driver of inflation last month, the ONS said. Computer game and package holiday prices helped to offset the impact of the higher bills.

The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.

Manufacturers’ costs for raw materials – many of them imported – were 3.8% higher than in April 2018, much less than the 4.5% rise predicted by the Reuters poll.

The ONS said house prices in March rose by an annual 1.4% across the United Kingdom as a whole compared with 1.0% in February, marking the first increase in house price inflation since September. Prices in London alone fell by 1.9 percent, a smaller drop than in February.

The ONS also revised down its estimate for Britain’s budget deficit in the last 2018/19 financial year that ended in March.

The headline measure of public sector net borrowing amounted to 23.5 billion pounds that year or 1.1% of gross domestic product, compared with the previous estimate of 24.7 billion pounds or 1.2% of GDP.

In April, the first year of the 2019/20 financial year, the deficit stood at 5.8 billion pounds, as expected by economists.

Reporting by Andy Bruce; Editing by Alison Williams

Source: UK Reuters

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April property transactions remain stagnant

Residential property transactions remained stagnant in April but increased slightly on last year’s figures, latest official data has shown.

In its UK property transactions statistics report released today (May 21), HM Revenue & Customs estimated 99,420 residential and 11,300 non-residential transactions were made in April.

April’s seasonally adjusted residential figure saw a slight drop on the previous month — 0.3 per cent — but increased by 0.8 per cent on the same month the previous year.

The findings reflect last week’s (May 16) figures from UK Finance, which showed the number of consumers borrowing to buy a new property in March was down across first-time buyers, home-movers and buy-to-let purchases when compared with last year.

According to today’s report, non-residential transactions were up on March’s figure by 9.5 per cent and increased by 7.1 per cent compared to last year.

Kevin Roberts, director at Legal & General Mortgage Club, said the figures showed that despite government schemes and greater innovation in the mortgage market, property transactions continued to stagnate.

He said: “To really see a boost, we need to fix our country’s imbalance between supply and demand by building more homes. Not only for first-time buyers, but across all housing tenures – young and old, renters and homeowners.

“As an industry, we are working to provide the solutions needed but we also need to ensure the government is increasing supply and making the UK housing market accessible for all.”

But Joshua Elash, director of property lender MT Finance, said it came as no surprise to see transaction numbers dropping month-on-month in the residential space.

He said he expected this trend to continue while uncertainty over Brexit continued to impact the market for consumers and while “overly aggressive tax treatment” continued to dampen investor activity and appetite in the buy-to-let market.

Meanwhile head of lending at Mortgage Advice Bureau, Brian Murphy, said the figures demonstrated a level of consistency in the market.

Mr Murphy added: “While the number of sales last month doesn’t equate to a ‘spring surge’ by any means and is down slightly on the previous month, equally they potentially point to a degree of resilience in the face of ongoing political headwinds.

“[The figures] indicate that the market continues to turn over steadily, rather than any dramatic peaks and troughs, which many may suggest is no bad thing.”

By Imogen Tew

Source: FT Adviser

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UK housing market weathers Brexit clouds, but sharp gains unlikely – Reuters poll

Britain’s expensive housing market has so far weathered the uncertainty swirling around the country’s planned departure from the European Union, but average prices are unlikely to rise sharply and will fall in London this year, a Reuters poll found.

Nearly three years ago Britons surprised most of the world when they voted to split from the EU, yet it is still unclear how, when or even if the two sides will part ways.

Prime Minister Theresa May said on Sunday she would make a final attempt to get her Brexit divorce deal through parliament before she leaves office, something she has failed to manage three times already.

With no resolution in sight, Brexit uncertainty has affected property prices in the capital – long a magnet for foreign speculators – as people have shied away from investing, despite a fall in sterling since the referendum making UK housing a relatively cheaper investment.

Real estate agent Foxtons, which focuses on the London market, said on Monday UK property sales were running at record lows due to the impact of Brexit on consumer confidence.

According to the May 10-21 Reuters poll, prices will drop 2.0% in London this year, the same median forecast given in a February survey.

But that might not be a bad thing for buyers. When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8.5, higher than in previous surveys. Nationally they were rated 6.0.

“It’s the same old story – housing is cheap for those with some capital behind them, given low funding costs, but very expensive in terms of the income multiple,” said Peter Dixon at Commerzbank.

The average annual British salary is about 30,000 pounds ($38,100) and yet the average asking price for a home in Britain was 308,290 pounds this month, and more than double that in London, property website Rightmove said.

For those already on the property ladder, borrowing money is cheap. The Bank of England has set Bank Rate at 0.75 percent and is not expected to raise it any time soon. [ECILT/GB]

YOU AIN’T SEEN NOTHING YET

Looking nationally, over 80% of respondents to an extra question in the poll said the housing market had so far weathered the Brexit uncertainty and price rises are expected to prove fairly robust.

Home values will gain 1.2% nationally this year – lagging expectations for general inflation – 2.0% next year and 2.5% in 2021, the poll of 23 housing market watchers said.

“The UK market has remained remarkably resilient,” said Russell Quirk at property website Vyomm.com. “So, just imagine the enormity of the ‘happy-ending’ that will prevail when the current political paralysis ends.”

Economists in another Reuters poll conducted earlier this month said Britain would eventually agree a free trade deal with the EU and London home prices are expected to rise 1.0% next year and 2.5% in 2021.

However, as negotiations to leave the club Britain joined in 1973 have proved protracted it does not bode well for when talks over future deals with global partners need to be agreed. Over three-quarters of respondents to an additional question said the risks to their forecasts were to the downside.

“Whilst everyone is conscious of Brexit we face a further 2-3 years after the Brexit Agreement to deal with the so-called implementation phase,” said independent buying agent Henry Pryor. “If you think getting the Withdrawal Agreement done was hard work, I expect you ain’t seen nothing yet!”

Polling by Sarmista Sen and Hari Kishan, Editing by William Maclean

Source: UK Reuters

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London house prices: How Brexit uncertainty has hit house prices in every borough

London is “acting as a drag” on the rest of the UK housing market, with prices across the capital falling in the last year, according to new figures from property giant Rightmove.

While some regions in the UK such as the midlands and the north west started to kick the Brexit uncertainty that has gripped the housing market in recent years, Greater London average asking prices fell 2.5 per cent annually.

A sales slump in central London saw average asking prices fall 3.8 per cent annually to £757,773 in inner-city areas, while the average in outer London, including cheaper boroughs such as Bexley, Barking and Dagenham fell 0.9 per cent to £512,726.

This came despite the annual spring surge in prices, which only drove Greater London up 1.2 per cent on a monthly basis.

The slumps compared to a record-breaking year in other parts of the UK, however, as average asking prices in Wales, the Midlands and the north west of England bucked any Brexit blues to hit all-time highs, Rightmove found.

London boroughs

Worst hit in the capital was Westminster, where average asking prices fell 6.3 per centannually – but still clocked in at an eye-watering £1.4m. The same was true of Britain’s most expensive area to live, Kensington and Chelsea, where average asking prices fell 3.9 per cent year-on-year to £1.6m.

Kensington And Chelsea Street, Egerton Crescent Named Most Expensive For Second Year Running
Kensington and Chelsea saw a 3.9 per cent annual fall (Source: Getty)

The only boroughs to see an annual rise in average asking price were Bexley and Barking and Dagenham, two of London’s cheapest areas. Bexley rose 0.6 per cent to £408,233, while Barking and Dagenham rose 0.9 per cent to £316,839.

Meanwhile in zones one and two, Lambeth fell 4.7 per cent to £632,590Hackney fell 4.9 per cent to £626,000 and Tower Hamlets fell 6.1 per cent to £559,475.

Jeremy Leaf, north London estate agent and a former Royal Institution of Chartered Surveyors (Rics) residential chairman, said: “London is acting as a drag on the rest of the UK housing market and prices don’t include inflation so have risen or fallen further in real terms.

“The spring bounce is taking place but not reaching to the heights we would have expected and certainly not in the capital.”

Borough

Avg. price May 2019

Monthly change

Annual change

Barking and Dagenham £316,839 1.0 per cent 0.9 per cent
Bexley £408,233 1.2 per cent 0.6 per cent
Hammersmith and Fulham £931,171 0.9 per cent -0.2 per cent
Sutton £470,697 2.5 per cent -0.3 per cent
Southwark £634,232 -1.8 per cent -0.5 per cent
Islington £770,123 1.1 per cent -0.8 per cent
Hillingdon £492,585 1.7 per cent -0.9 per cent
Bromley £530,492 0.5 per cent -0.9 per cent
Waltham Forest £481,926 0.8 per cent -1.0 per cent
Enfield £457,398 0.8 per cent -1.2 per cent
Ealing £555,611 0.8 per cent -1.4 per cent
Havering £406,075 -1.2 per cent -1.5 per cent
Brent £577,818 1.5 per cent -1.5 per cent
Camden £980,210 1.2 per cent -1.5 per cent
Newham £407,868 -0.3 per cent -1.8 per cent
Merton £645,116 2.7 per cent -2.0 per cent
Hounslow £540,484 -0.9 per cent -2.0 per cent
Croydon £437,195 1.2 per cent -2.2 per cent
Kingston upon Thames £610,076 0.4 per cent -2.3 per cent
Harrow £549,634 0.4 per cent -2.3 per cent
Redbridge £451,503 -0.4 per cent -3.2 per cent
Richmond upon Thames £832,012 2.7 per cent -3.3 per cent
Wandsworth £793,014 -2.4 per cent -3.5 per cent
Lewisham £464,200 1.3 per cent -3.5 per cent
Barnet £639,192 0.7 per cent -3.5 per cent
Greenwich £441,287 -0.1 per cent -3.5 per cent
Haringey £602,170 -0.1 per cent -3.7 per cent
Kensington and Chelsea £1,590,380 4.8 per cent -3.9 per cent
Lambeth £632,590 0.8 per cent -4.7 per cent
Hackney £626,095 0.1 per cent -4.9 per cent
Tower Hamlets £559,475 -0.5 per cent -6.1 per cent
Westminster £1,400,270 -1.7 per cent -6.3 per cent

The rest of the UK

The rest of the country painted a very different picture, according to Rightmove.

For homes coming to market this month in Wales, the Midlands and the north western England, average asking prices hit all-time highs, as a shortage of demand pushed prices up.

Wales broke through the £200,000 barrier for the first time ever, at £200,386, rising 4.1 per cent year-on-year, while houses in the west Midlands rose three per cent to £232,247.

Travel Images Of Manchester
The north west of England, including Manchester (pictured) saw an annual rise in prices (Source: Getty)

But for those commuting into central London from outside the capital, prices fell. In the south east of England, the annual average asking price fell 1.1 per cent to £407,239.

Rightmove director Miles Shipside said buyers were largely ignoring Brexit, with buyers spurred into action in the record-breaking regions.

“Despite the ongoing political uncertainty, agents are reporting that the lure of the right property at the right price still attracts good interest. In spite of some of the challenges in the market, interest in property remains very high,” he said.

By Alex Daniel

Source: City AM

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UK house price growth eases, London a drag

UK house price growth slowed in May, while all but two London boroughs saw a decline, according to the latest survey from Rightmove.

House prices rose 0.9% on the month in May compared to a 1.1% increase in April. On the year, prices were 0.1% higher, versus a 0.1% drop the month before.

Rightmove said four out of 11 regions were “bucking the Brexit blues”, with Wales, the West and East Midlands and the North West all setting new asking price records for newly-marketed property.

However, in the capital, just two of the 32 boroughs – Barking and Dagenham and Bexley – saw prices increase.

Mile Shipside, Rightmove director and housing market analyst, said: “Price increases are the norm at this time of year, with only one fall in the last ten years, as new to -the-market sellers’ price aspirations are under pinned by the higher buyer demand that is a feature of the spring market.

“Indeed the 0.9% monthly rise is consistent with the previous two years’ average rise of 1.0% over the same period. What will seem inconsistent to some, given the ongoing uncertainty of the Brexit outcome, is that four out of eleven regions have hit record highs for new seller asking prices.”

North London estate agent and former RICS residential chairman, Jeremy Leaf, said: “Asking prices are not selling prices, which explains why some of these figures do not match results from other recent housing surveys. Overall, although there has been little change, that masks some considerable regional differences. For instance, London is acting as a drag on the rest of the UK housing market and prices don’t include inflation so have risen or fallen further in real terms.

“The spring bounce is taking place but not reaching to the heights we would have expected and certainly not in the capital.

“Looking forward, we are not expecting significant changes one way or the other, at least until Brexit is clarified.”

By Michele Maatouk

Source: ShareCast

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Sterling set for worst week of 2019 as Brexit talks collapse

Sterling dived to a four-month low on Friday after cross-party Brexit talks collapsed and concern grew about the impact Prime Minister Theresa May’s likely resignation would have on Britain’s EU divorce.

The pound has traded in a narrow range of $1.29-1.32 since Brexit was delayed in late March, but following weeks of talks between May’s Conservatives and the opposition Labour Party that yielded nothing the currency slumped out of its narrow range.

May has agreed to set out a timetable for her departure in early June when parliamentarians are likely to again vote against her thrice-rejected EU withdrawal agreement..

That raises the prospect of a Conservative leadership battle producing a more Eurosceptic British leader who could move Britain towards a no-deal Brexit, the worst case scenario for sterling.

“What we’re seeing is the market pricing in a higher probability of an exit without a deal,” Adam Cole, chief currency strategist at RBC Capital Markets, said, noting the growing risk that the bill would fail to pass and May would depart before parliament goes into recess in late July.

“It looks increasingly likely she will be replaced by a pro-Brexit PM with no election, and that automatically increases the chances of a no-deal Brexit.”

Sterling was down for a tenth consecutive session, touching a four-month low of $1.2733 and falling 0.6% against the euro to 87.61 pence, the lowest since February 15.

It is now set for its worst week since February 2018, and a further fall would make it one of the worst weeks in well over a year.

For a graphic on Sterling set for worst week in months, see – tmsnrt.rs/2WVBGSp

Another outcome could be no Brexit at all — a boon for the pound — or the possibility of a general election and a Labour government in power.

“The market doesn’t like elections at the best of times, and given it has a natural capitalist orientation, it’s not a surprise it worries over this (possible) Labour government,” said Neil Mellor, senior currency strategist at BNY Mellon.

On Thursday, the head of Britain’s National Grid criticised Labour’s plans to re-nationalise energy networks, saying that would increase costs for consumers and might prompt legal challenges.

Next week’s European parliamentary vote is another cause for concern, with Nigel Farage’s Brexit Party on course to pick up 34% of the vote, more than the Conservative and Labour parties combined.

Reporting by Abhinav Ramnarayan, editing by Gareth Jones

Source: UK Reuters

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Consumers in the north the most pessimistic about UK economy, says report

CONSUMERS in the north are most pessimistic about the prospects for the UK economy, according to a new report.

Analysis from Which? for 2018 shows that two in five people (42 per cent) in Northern Ireland believed the UK economy was in a poor state last year, while almost two-thirds (60 per cent) expected it to deteriorate in 2019.

By contrast, across the UK as a whole, only half (49 per cent) anticipated the economy would worsen.

Of chief concern was rising fuel prices, cited by three-quarters (74 per cent) of local respondents, compared to two-thirds in the UK (68 per cent).

Brexit was highlighted by seven out of 10 (71 per cent) consumers as a worry, along with public spending cuts, both to a greater degree than in the UK as a whole.

Energy bills and the cost of groceries were also among the most common worries for consumers in Northern Ireland.

More people in the north expected to increase spending on everyday essentials compared to consumers across the UK, according to the report, while hikes were also forecast in the cost of groceries and in relation to rent or mortgage payments.

In spite of the plethora of issues raised by consumers in the north, 71 per cent said they were satisfied with their life overall, compared to two-thirds UK-wide (65 per cent). Local people were also happier about their household financial position, with over half (51 per cent) describing it as good,

just above the UK figure of 49 per cent.

Caroline Normand, Which? director of advocacy, said the latest figures for Northern Ireland were concerning.

“This report highlights a worrying sense of pessimism among consumers in Northern Ireland, with Brexit, fuel costs and public spending weighing on people’s minds more than anywhere else in the UK,” she said.

“With uncertainty around Brexit and Stormont politics looming large, politicians, regulators and businesses in Northern Ireland must take heed of these findings and work to ensure consumers are not getting a raw deal when it comes to essential services.”

Source: Irish News

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United Kingdom unemployment rate falls to 3.8%; wages rise 3.2%

A record 71.8% of working-age women were in employment between January and March this year, according to the Office for National Statistics (ONS). With the United Kingdom hovering close to full employment, the unemployment rate at its lowest since 1974 and the inactivity rate remaining low, there is very little spare capacity in the labour market – and the gap is being filled by ambitious foreign workers who see the chance to build a career in Britain.

The unemployment rate in Britain has fallen to the lowest rate since 1974, with just over a third of those joining the workforce in the previous year coming from outside the European Union.

Excluding bonuses, average weekly earnings for employees rose by 3.3%.

British Employment Minister Alok Sharma applauded the lowest unemployment rate since the 1970s, but called on workers to improve their skills in a bid to “create a modern workforce fit” for new challenges.

Mike Jakeman, senior economist at PwC, said: “It is possible to see the shadow of Brexit in some of these figures”.

Tony Wilson, director of the Institute for Employment Studies, said: “On the face of it, today’s jobs figures look like more of the same – the employment rate is holding steady at a record 76.1%, year-on-year earnings growth above 3%, and unemployment falling yet again, to just 3.8%”.

The strength of the labour market has pushed wages up more quickly than the Bank of England has forecast, leading some economists to think it might raise interest rates faster than investors expect once the Brexit uncertainty clears.

The unemployment rate for women has shown a smaller fall over this period – from 6.4% to 3.7%.

The ONS said that 32.71 million people were in employment, an annual rise of 354,000.

The latest data shows that over the last five years the unemployment rate for men has fallen from 7.0% to 3.9%, the ONS said.

For men the rate was 3.9%, the lowest since mid 1975. This is because falls in the employment rate for men have been roughly offset by population increases. Pension rule changes that force women nearing retirement to work longer have also had an impact.

What is happening to wages and jobs?

While average real wages – adjusted for inflation – were the highest since December 2010, the TUC said the rate of growth was slowing.

“This will come as a relief to employers who have been subjected to increasing pressure from workers to raise pay without accompanying productivity growth”, said Davies. “The last thing workers need is another hit in the pocket when real wages are still lower than a decade ago”.

“The employment rate for young people in Scotland rose to 59.3%, higher than the United Kingdom rate of 54.6%”.

By Marco Green

Source: Click Lancashire