Inflation rose to 3.1% in November, the highest in nearly six years,


Inflation rose to 3.1% in November, the highest in nearly six years, as the squeeze on households continued.

The Office for National Statistics (ONS) said that airfares and computer games contributed to the increase.

The most recent data shows that average weekly wages are growing at just 2.2%.

Mark Carney, the governor of the Bank of England, will now have to write a letter to Chancellor Philip Hammond explaining how the Bank intends to bring inflation back to its 2% target.

Mr Carney has to write a letter to the chancellor if the Consumer Prices Index (CPI) inflation rate is above 3% or below 1%.

In November, the Bank of England raised its key interest rate for the first time in more than a decade from 0.25% to 0.5%.

However, it is not expected to announce a further increase when it publishes the results of the Monetary Policy Committee’s two-day meeting on Thursday.

Mr Carney had said that he expected inflation to peak in October or November.

The last time he wrote to the chancellor was in December 2016, after inflation fell to 0.9% in October that year.

Mr Carney’s latest letter will be published in February, when the Bank of England will also release its quarterly Inflation Report.

Analysis, Andy Verity, economics correspondent

Image copyright PA

It may be the highest rate of inflation for nearly six years. But that tells you not so much how high it has got but how low it has been for so long.

In the past 10 years, inflation’s peak has been 5.2% (in 2011). Tell anyone over the age of 50 that inflation at 3.1% is out of control and you’re likely to get a scoff, followed by memories of the 70s and 80s.

What they may forget, though, is that for most of that time wages were also rising – and faster than prices. The tendency of wages to respond to higher prices and outpace them seemed to follow an iron logic back then.

Bigger price rises led to bigger pay rises, forcing many employers to charge higher prices to cover higher labour costs: the so-called “wage-price spiral”.

But those rules don’t seem to apply these days. The breakdown of that logic is why we have a squeeze on living standards. It is also why the Bank of England isn’t that worried about above-target inflation getting higher or even staying above target. In the City, a second rise in interest rates isn’t expected until August next year.

Pricier food

Lucy O’Carroll, chief economist at Aberdeen Standard Investments, said: “It’s quite possible that inflation is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall.

“That means that further interest rate rises are definitely not off the table.”

The ONS said that although airfares fell in November – down 10.4% – the decline was not as steep as last year when they tumbled 13.4%.

Data also shows that food inflation has picked up, especially prices for fish, oil and fats, such as butter and chocolate.

Figures from market researcher Kantar Worldpanel released on Tuesday indicated that food inflation hit 3.6% in the three months to 3 December, the highest rate since 2013.

It also noted that prices for butter and fish had grown as well an increase in the cost of fresh pork. Kantar said only a few items were cheaper during the period, such as fresh chicken and crisps.

Richard Lim, chief executive at Retail Economics, said that the rise in inflation had come “at precisely the wrong time for retailers”.

“In the run-up to Christmas, the cost of living, now rising at the fastest rate in five years, remains uncomfortably high for households.”

He said that food inflation “is one of the most transparent indicators of living costs and often the catalyst to cut back on spending elsewhere”.

However, he expects the inflation rate to now fall and could reach 2.5% by Easter.

The ONS will announce employment data for the August to October period on Wednesday, which will include figures for wage growth.

Ben Brettell, senior economist at Hargreaves Lansdown, forecasts that average weekly wages have risen by 2.5% during the period.

He said: “With wage growth picking up we should see an end to falling real pay in due course.

“That’ll be of small comfort, however, to households facing a significant increase in the cost of Christmas this year.”

Source http://www.bbc.com/news/business-42320052

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UK Private Property Value Rises Nearly 50% in Last Decade

Whilst decade of growth is highest in London and the south, occupancy rates in the capital remain low

Over the last decade, the value of the UK’s private residential stock has grown by trillion, with over half of it concentrated in London and the South East.

This brings the total value to over tn for the first time, an increase of 48%, according to recent research by Halifax.

2017 alone saw an increase of billion, putting the average value per household at compared to the 2007 average of 290k

Unsurprisingly, the southern regions owned the majority of the private property wealth; 68% ( 5tn) in 2017, up from 62% in 2007.

Of the 3tn raised in the last decade, 55% was concentrated in London and the South East.

However, homeownership is becoming increasingly difficult in the capital; with average house prices soaring 71% since 2007 to owner-occupancy rates are as low as 48% in London.

The UK owner-occupancy average, by comparison, is 63%.

Russell Galley, managing director at Halifax, said: “While more than a fifth of total property wealth is in London, lower levels of owner occupation reflect a major barrier to the property ladder with a far great number of people renting where house prices are at their highest.”

With high prices impacting occupancy and affordability, Savills reported last week that the southern regions are likely to see modest house price growth compared to areas like the North West.

Housing Supply Could be Boosted by More Funding to SME Builders

In his budget speech this week, the Chancellor pledged 2 billion for the Home Building Fund to be targeted specifically at small and medium sized builders (SME) – allowing them to play a greater role in tackling the UK’s critical housing shortage.

Welcoming the announcement, Chief executive Brian Berry from the Federation of Master Builders (FMB) said that the government’s new goal of building 300,000 homes pa by mid-2020s, together with the 50 billion pledged in the budget to meet this target, will boost the sector.

Furthermore, a 700 million fund has also been promised to increase opportunities for small scale developments, by requiring councils to deliver more homes from smaller sites, which are faster to build.

Further commenting on the proposals, Mr Berry said that with Brexit on the horizon, one of the major challenges to building more will be a shortage of skills, as European workers make up a significant proportion of the sector’s workforce.

Ensuring that the UK’s building industry continues to have access to a skilled labour pool remains therefore a concern for many in the sector.

Liz Jenkins, partner at international services firm Clyde & Co, said:

‘Meeting the Chancellor’s ambitious targets will require an available and skilled construction workforce.’

‘In the long term we need to be attracting the next generation of talent into the sector but we have an immediate priority to create the skills we need to deliver new homes today,’ she added.

North West set to Lead House Price Growth in the UK

House prices set to surge in the north, while the south falls behind

The North West of England is set to see the strongest house price growth over the next 5 years, according to a report by leading estate agent Savills, with prices projected to rise by 18.1% between 2018 and 2022.

The region is followed by the North East and Yorkshire & Humberside, where prices are expected to increase by 17.6% in both areas – surpassing the UK average of 14.2%.

On the other end of the spectrum, southern regions are likely to see a more modest growth, as affordability continues to be squeezed in these areas.

The East of England and the South East are both projected to see a rise of 11.5%, while London will only see a small increase of 7.1% by 2022.

According to the company, the next five years is expected to follow the typical market cycle, where a more modest growth in London often leads to a surge in momentum for the North West and the North East.

With these areas being more affordable than the capital, they are more likely to attract first time buyers looking to put down a smaller deposit and avoid a large stamp duty bill.

Rents are generally also more affordable in these areas, compared to the south, which increases the possibility of retaining more graduates in the regions and, in turn, the demand for rental properties.

Commenting on the report, Lawrence Bowles, Associate at Savills, said:

‘Affordability in the capital is already more stretched than the rest of the UK, putting a brake on growth. But areas beyond the Home Counties have potential for growth: incomes have grown more in line with house prices, aiding affordability.’

Interest Rate Rises for First Time in More Than a Decade

Monetary Policy Committee voted to increase base rate to 0.5%

The Bank of England has voted to increase the base interest rate in the UK, ending more than a decade of interest rate cuts.

 

The decision, made by the Bank of England’s Monetary Policy Committee (MPC), increased the interest rate from 0.25% to 0.5%, reversing the emergency rate cut made in August 2016 in the aftermath of the Brexit referendum last year.

 

Citing the continuing weak performance of sterling and rising costs for households as core reasons for the decision, Bank of England Governor, Mark Carney, said that today’s increase marks the first of three rate increases over the next three years, but that these would be limited and gradual.

 

Rising interest rates would help to support the value of the pound in the markets, whilst providing savers with greater incentive. However, Mr Carney warned that the change would make the cost of borrowing more expensive.

 

The rise follows the publication of September’s Consumer Price Index (CPI) which showed that inflation in the UK had reached a level of 3%. The Bank – and the MPC – are targeted to maintain a CPI of 2% to prevent the economy from overheating.

 

In addition to sluggish productivity levels in the UK, Mr Carney said that ‘the decision to leave the European Union is already having a noticeable impact’ on the UK’s economy.

 

In the report accompanying the MPC’s decision, the group highlighted that ‘Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.’

‘Million Home Shortage’ in England by 2022

More than a million new homes must be built over the next five years to address the ongoing shortage of houses in England.

Research published by conveyancing firm Search Acumen, based on data from the Office for National Statistics (ONS), has revealed that the housing market will continue being undersupplied unless the government intervenes.

According to ONS figures, the deficit of homes in England’s housing market has reached more than 530,000 since 2005.

Utilising current birth, death and migration rates, as well as the current Conservative manifesto pledge to build 300,000 new homes per year, Search Acumen’s research found that the shortfall is set to continue in the years ahead – with an additional 510,000 new homes needed to meet the demands of the market up to 2022.

This would mean that the total undersupply of homes in the English market would stand in excess of 1 million.

Warning of a future where those ‘looking for an affordable home simply cannot’, managing director at Search Acumen, Andrew Lloyd, called upon the government to make changes in their approach to the housing market.

‘Our research suggests that, even with housing supposedly higher up the political agenda, the pledges made at the last election won’t do the job of keeping up with demand in the long-term after years of under-investment into new housing,’ said Lloyd.

‘We just need our leaders to share our industry’s sense of urgency and begin laying foundations for our economic success right away.’

House Price Index Reaffirms North-South Divide

Property asking prices went up by 1.1% (+ ) this month, the largest October increase since the 1.4% rise in 2014. Eight out of 10 regions saw this increase, except for Yorkshire & Humber and East Midlands.

 

According to the latest house price index by Rightmove, the 104,000 new-to-market sellers may struggle to achieve a sale before Christmas as buyers are being cautious.

While the overall number of properties appearing on the market in England and Wales went up last month by 3.1%, compared with the same period in 2016, the number of sales agreed was down 5.9%.

However, the north is outperforming the south, with a fall of only 3.0% of sales, compared to the south’s 7.9%.

This is due in part to the increasing difficulty sellers of five-bedroom homes or four-bedroom detached properties are having, especially in London, where it takes an average of 86 days to find a buyer.

By comparison, sellers of three or four-bedroom homes, excluding four-bedroom detached properties, are typically sold in an average of 60 days. This suggests that second-steppers – typically couples and young families that are already on the property ladder and looking to move up – are the target audience for sellers that want to secure a sale before Christmas.

Rightmove’s director and housing market analyst, Miles Shipside, suggests sellers may want to price their properties competitively to achieve a sale:

“With buyers becoming more Scrooge-like with their cash, sellers who have undercut the average 1.1% rise in asking prices may stand a better chance of finding a buyer before Christmas”.

He goes on to say that “with buyers’ average wage rises often falling behind retail price inflation, and with a rise in interest rates being more heavily trailed by the Bank of England, sellers in these most popular sectors should still be wary of over-pricing.”

Get ready for a rate rise

BREXIT BULLETIN
Brexit is no longer the Bank of England’s biggest concern.

The bank’s monetary policy committee, led by Governor Mark Carney, reacted to accelerating inflation by  declaring on Thursday that “some withdrawal of monetary stimulus was likely to be appropriate over the coming months.”

Investors are now anticipating action as soon as the next meeting in November, regardless of any overhanging cloud from the U.K.’s exit from the European Union, which the bank expects to slow the economy.

It’s been over a decade since the BOE last raised rates and for most of the past year it has come under fire from Brexit supporters for highlighting the economic risks of the split. It again warned on Thursday that the divorce poses a challenge to the outlook.

The uncertainty may not be sufficient to stay the BOE’s hand, though. By one measure, the odds on a hike by November have risen to more than 60 percent from 40 percent earlier on Thursday. A rate rise is fully priced in for February 2018.

Bloomberg Intelligence economists Dan Hanson and Jamie Murray say if the BOE does act in November, it’s unlikely to mark the start of a series of interest rate increases. If that proves to be the case, the flow of data should keep rates on hold until 2019.

Over at Bloomberg Gadfly, Mark Gilbert and Marcus Ashworth say policy makers “ should continue to charm the pound higher, but should refrain from pulling the rate-rise trigger while growth stays lackluster and consumer confidence remains fragile at best.”

Simon Kennedy

The Business of Brexit

Britain’s retail giants may not be happy about higher interest rates, but there are splits over the economic effects of Brexit as business leaders prepare to meet government officials on Friday.

James Dyson, the man behind the eponymous vacuum cleaner, said on Thursday that the prospect of a disorderly Brexit doesn’t faze him and that the introduction of tariffs on trade “frankly [would] hurt the Europeans more than the British.” For Charlie Mayfield, chairman of John Lewis, one of Britain’s best-loved retailers, Brexit “is having an impact on everyone” and rattling business confidence.

“There needs to be a serious parliamentary debate to find the best way forward for the country and the economy,” Mayfield said.

Simon Wolfson, the boss of apparel chain Next, who like Dyson backed Brexit, also entered the debate by saying “things have stopped getting worse” and that price inflation would soon slow.

Separately, European businesses are getting increasingly frustrated by the slow pace of the Brexit talks, even as post-divorce decisions loom in corporate boardrooms, according to a  report from the Council of British Chambers of Commerce in Europe.

Brexit Latest

On the Markets | Sterling surged to its highest against the dollar in a year after the Bank of England revealed its thinking, and the cost of options to buy the pound relative to selling it soared to the steepest in more than three years. Former Chancellor Norman Lamont, who backed Brexit, said sterling could appreciate “considerably” if a Brexit deal is struck.

May Must Listen | Prime Minister Theresa May will have to listen to lawmakers who oppose her Brexit legislation, Leader of the House of Commons Andrea Leadsom said, acknowledging the premier’s weakened hand.

Customs Warning | The head of the U.K. tax agency said Britain could need up to 5,000 extra staff to handle customs and border checks after Brexit, the BBC reported. John Thompson said a new customs arrangement with the EU could cost as much as £800 million ($1.07 billion) and take seven years to implement.

Electricite de France | The French energy giant said the U.K.’s plan to quit the EU treaty that governs nuclear fuel and equipment trade as part of Brexit may hurt the operation of its eight British atomic power stations and its £19.6 billion project in southwest England. Separately, Business Secretary Greg Clark said the U.K. is establishing a domestic nuclear safeguards regime.

Trade Boost | EU officials sought to reassure the U.K. that the EU has no appetite to stall trade negotiations. Press reports that the U.K. will be placed at the back of the queue for a free-trade agreement with the EU after 2019 are “nonsense,” Jyrki Katainen, a vice president of the European Commission, the bloc’s executive, told reporters.

And Finally…

Prepare to hear almost 5,000 words on Brexit next Friday when Prime Minister Theresa May delivers her much-anticipated speech in Florence.

A photographer with a track record of document-spotting in Downing Street yesterday snapped a photo of a what appeared to be draft of the speech as a civil servant carried it down Downing Street. BBC political editor Laura Kuenssberg said the civil servant in question was Ollie Robbins, the top official dealing with Brexit.

While the picture didn’t reveal much, it showed a word count of 4,980 and that May’s opening words are currently “I am delighted [to be in Florence], a city that taught us what it was to be European.”

Brexit Failing to Impact Home Mover Decisions

People move homes mostly due to personal circumstances, says research

The majority of UK home movers say that the UK’s impending exit from the European Union has had no bearing on their decision to move home.

 

Research conducted by the Mortgage Advice Bureau revealed that 71% of property owners have not considered Brexit an important factor when planning the purchase of their next home.

 

Instead, home movers indicated that it was their personal circumstances that were behind their decision to move house, with 65% indicating that a change in lifestyle such as having a family or starting a new job was the main reason.

 

The group least likely to be affected by the impact of Brexit were those aged 25-34, said the survey. Amongst this demographic, 38% cited that the growing size of their families was the reason that they would be changing property.

 

Brian Murphy, Head of Lending at the Mortgage Advice Bureau, said: ‘This report should be regarded as a reality check and a reminder of the fact that, for most, a home move is driven primarily by personal circumstances rather than economics or politics.’

 

Murphy continued: ‘The poll gives us valuable insight into consumer sentiment and would indicate that homeowners who are motivated to move are not being swayed by the political negotiations, with consumer confidence in property seemingly still high.

The Midlands Leads UK House Price Growth in August

Counties in the UK’s central region are seeing significant annual growth, says Rightmove

 

Asking prices across the Midlands witnessed the largest increase in the UK this month, according to the latest house price index from property listings website, Rightmove.

Leading annual growth across the regions, the East Midlands was home to a 6.8% annual increase in property asking prices, with the average value now standing at

Sellers in the West Midlands and the North West also drove an increase in asking prices, with the two regions posting annual growth of 5.8% and 4.7% respectively.

All regions in the UK reported an annual increase in August, with the smallest growth being found in the North East (1.0%) and Greater London (1.6%).

The anticipated seasonal slowdown in the UK housing market also created a distinct split in monthly performance across the regions, said Rightmove, with the central belt of the UK commanding the highest levels of property price growth.

Led by an increase of 1.1% in Wales, four out of ten UK regions reported growth in asking prices compared to July 2017, with the North West, the West Midlands and the East Midlands seeing property asking prices rise by 0.9%, 0.8% and 0.4% respectively.

 

The East of England maintained its performance from last month, with no change in asking price within the region. However, half of UK regions were home to a fall in prices this month, with the capital continuing to struggle.

Greater London saw asking prices decline by 1.9%, whilst there were also monthly downturns in the South East (-1.7%) and the South West (-1.3%). Asking prices also fell by 0.8% in both the North East and Yorkshire & Humber, as the traditional summer lull in housing market activity took effect in August.

Commenting on the distinct trend found in their latest figures, Rightmove director, Miles Shipside, said:

‘High demand and limited supply are still driving momentum, especially in the counties in the middle of the country. Here, year-on-year rises at over twice the national average are widespread, in contrast to southern and northern counties where none have approached these heady heights.’