Archive for October, 2009
Friday, October 30th, 2009
According to the Nationwide, house prices were 2.0% higher in October 2009 than they were a year earlier, to give an average house price of £162,038. This was the first annual rise in house prices for nineteen months.
Whilst this is promising news for the housing market at first glance, the figures behind the headline are not all good. For example, although house prices have now risen for the sixth consecutive month according to the Nationwide index, the rate at which prices are rising is falling back. Average property prices rose by 1.4% in July and August, but growth fell back to 0.9% in September and only 0.4% in October. When the last three months are compared to the previous three months, growth dropped back from 3.8% to 3.4%.
The recent trend in house price inflation can be seen in the figure below.
 Source: Nationwide
Martin Gahbauer, Nationwide’s Chief Economist highlighted the fact that the UK economy remained in recession in the third quarter, saying: “The surprisingly poor figures have mixed implications for the housing market. On the one hand, a deeper and longer recession implies higher levels of unemployment and a longer period of subdued wages, both of which will act as constraints on the housing market’s recovery. Given the poor labour market situation implied by the economy’s ongoing weakness, it is difficult to imagine the housing market returning to the buoyant levels of activity and price inflation that prevailed earlier in the decade.”
On the other hand, he expected that the current low levels of interest rates would be maintained well into next year, and as a result “…mortgage affordability will remain relatively favourable for both new and existing borrowers. This should limit the number of distressed sales and cushion the negative impact of labour market weakness on housing demand.”
Tags: house prices, housing market
Posted in Housing | No Comments »
Thursday, October 29th, 2009
Figures published at lunchtime today show that the US economy grew during the third quarter from July to September at an annual rate of 3.5%. This follows four consecutive quarters of decline from the third quarter of 2008 of -2.7%, -5.4%, -6.4% and -0.7%.
It should be noted that the US states its GDP figures in a different way to the UK by using annualised figures which take the quarterly change and then multiply it to provide a seasonally-adjusted annualised rate.
Growth has obviously been helped by the government’s stimulus package which injected nearly £500bn into the US economy, which was bigger in percentage terms than the amount spent in the UK. On top of this, growth has been helped by spending on durable goods which rose by 22.3% in the quarter. This was largely due to the government’s scheme of offering “cash for clunkers” which has pushed up car sales.
 The US economy has grown for the first time in over a year.
The other major contributor to growth was a 23.4% increase in real residential fixed investment reflecting a pick-up in the housing market. Again, this was largely due to government efforts as a tax credit of $8,000 was offered for first-time buyers.
There was also an increase in total government spending of 7.9%. However, it is too early to say just how much of this increase reflects the government stimulus and whether there is sufficient organic growth within the economy to make the recovery sustainable. But, even so, the signs of growth in the US are at odds with the continued fall in GDP in the UK. Although, on a positive note, if the US continues to forge ahead this will have a very positive effect on the UK economy.
Tags: economic growth, GDP, recession, US
Posted in GDP, US economy, economic growth | No Comments »
Wednesday, October 28th, 2009
The Global Gender Gap Rankings for 2009 produced by the World Economic Forum show that the UK has fallen back in terms of gender equality. In 2006 the UK was in ninth position in the world but fell to 13th place in 2008 and 15th place this year.
The Index’s scores show the percentage of the gap between women and men which has been closed. In fact, the number one position was taken by Iceland in 2009 with a score of 82.8%. Three other Scandinavian countries, Finland, Norway and Sweden took the next three places. Interestingly, South Africa and Lesotho made enormous strides to close their gender gaps, entering the top ten at sixth and tenth position respectively.
The Global Gender Gap Report measures the size of the gender inequality gap in four critical areas:
- Economic participation and opportunity, which looks at outcomes on salaries, participation levels and access to high-skilled employment.
- Educational attainment – access to basic and higher level education.
- Political empowerment – representation in decision-making structures
- Health and survival – outcomes on life expectancy and sex ratio.
“Out of the 115 countries covered in the report since 2006, more than two-thirds have posted gains in overall index scores, indicating that the world in general has made progress towards equality between men and women, although there are countries that continue to lose ground.,” said co-author Ricardo Hausmann, Director of the Centre for International Development at Harvard University.
 Gender equality is still being held back in the UK by the 'glass ceiling' that is restricting the advancement of women.
The UK has been dragged down by inequalities in wages between men and women and also by the fact that the glass ceiling is still in operation for women. In fact, as women in the UK become older they take up less of the higher positions in business, politics and the professions. The UK actually ranks 74th for gender equality in the professional and technical workers classification, and is in 46th place for the number of women holding ministerial positions in the political arena.
Tags: Gender equality
Posted in Gender equality | No Comments »
Tuesday, October 27th, 2009
Following the decline in UK GDP of 0.4% during the third quarter of 2009, the Office of National Statistics has just published an interesting comparison between the current recession and previous recessions in 1990-91 and 1980-81.
They have only looked at two variables – changes in GDP and changes in unemployment. Although the UK has currently experienced six quarters of declining GDP in the current recession, the ONS only begins its comparison with the first quarter of steep contraction in GDP, which was the third quarter of 2008.
The figure below shows that there has been a steeper fall than in each of the previous two recessions. In fact, in the latest quarter GDP is 5.9 percentage points lower than when the recession started, whilst the equivalent figure for 1990-91 was 2.5 percentage points and 4.7 percentage points during 1980-81.
 Gross Domestic Product comparisons Source: ONS However, the unemployment figures show a different picture as can be seen below.
 Unemployment comparisons Source: ONS
Whilst the current unemployment rate is very similar to the picture seen in the 1980s recession it is below that seen during the 1990s. This is largely due to the fact that the UK labour market has appeared to be particularly flexible during this recession. Many larger companies have done deals on wage freezes and even wage reductions with their employees, and there have also been instances of temporary closures or shorter working weeks. It makes sense for firms not to panic and shed valuable workers in whom they have invested a lot of money in training, so that they can ride out the downturn with their labour forces largely intact, and so be ready for the recovery.
Tags: GDP, recession, uenmployment
Posted in GDP, recession, unemployment | No Comments »
Friday, October 16th, 2009
Posted in Uncategorized | No Comments »
Thursday, October 15th, 2009
With unemployment popularly expected to peak above three million, most commentators were surprised by one measure of unemployment showing a tiny fall over the three months to the end of August. In fact, according to the Office for National Statistics, there were 2.469m unemployed between June and August, which was slightly fewer than the 2.47m recorded between May and July. We have not seen a fall in unemployment since the March to May quarter in 2008.
However, when the last quarter is compared to the previous quarter, there was a rise of 88,000 which reflects a total rise in unemployment of 677,000 over the past year. However, the rate of increase in unemployment is obviously slowing. The unemployment rate was 7.9% for the three months to August 2009 which is up 0.3 over the previous quarter and up 2.1 over the year. Again, these figures are on a three-month average. When detailed monthly estimates are examined it suggests that the unemployment rate fell from 8.2% in June to 7.8% in August. The UK’s official rate of 7.9% is well below the 9.8% in the US and the 9.1% average in the EU.
 Unemployment is not exactly back on track but appears to be heading in the right direction.
As far as the claimant count is concerned, which measures the number of people claiming Jobseeker’s Allowance, this reached 1.63m in September 2009. This is the highest figure since April 1997. But, this figure only rose by 20,800 over the previous month, which whilst bad news for those affected, again shows a downward trend.
Other figures show that the employment rate for people of working age was 72.6% for the three months to August 2009, which is down 0.3 from the previous quarter and 1.8 over the year. There was, however, a fall in redundancies over the quarter of 68,000 to 233,000, although this figure was still 85,000 up over the year.
Average earnings, excluding bonuses, increased by 1.9% in the three months to August 2009 compared with the previous year, which is the lowest annual growth rate since comparable records began in 2001. This should help to dampen inflation.
What is particularly worrying about the current situation is that there was a further rise in youth unemployment, from 937,000 to 946,000. This means that 20% of young people between the ages of 16 and 24 are out of work and this rises to one in three for 16-17 year olds.
Although the overall trend in UK unemployment is going in the right direction the overall total does hide some changes in the labour market. For example, there are almost one million people working on a part-time basis – and, therefore ‘employed’ – who are actually looking for full-time work. Also, there are another 443,000 people who are working on ‘temporary’ jobs. On the other hand, it could be argued that this shows signs of the flexibility within the UK labour market which many other countries do not have.
This could be the reason that Yvette Cooper, work and pensions secretary was able to tell the House of Commons work and pensions committee that: “It may be that the traditional large gap between what happens to growth and what happens to employment may be narrowing.”
Tags: average earnings, Employment, redundancies, unemployment, youth unemployment
Posted in Employment, unemployment | No Comments »
Wednesday, October 14th, 2009
No, this isn’t about putting 20 pence pieces into a jar. The Institute of Directors has just published a report suggesting 34 ways that the UK government could cut £50bn from public expenditure. Some of these may be considered provocative suggestions but expenditure cuts have to start somewhere.
This is a 66 page report and provides a rationale behind every suggestion made. To read it click here.
Tags: cutting public expenditure
Posted in government spending | No Comments »
Tuesday, October 13th, 2009
The Consumer Price Index (CPI) measure of annual inflation fell to 1.1% in September from 1.6% in August. This was its lowest level since September 2004. Given the remit to the Bank of England to keep inflation within 1% of the 2% target, this means that a further fall in inflation may well require the governor of the Bank to write a letter to the Chancellor explaining why inflation is outside the boundary set.
The extent of the fall was rather surprising but was mainly due to gas and electricity bills which were unchanged between August and September this year but had risen a year ago. There was also downward pressure on prices from food and non-alcoholic drinks which fell by 0.9% between August and September. Other downward effects came from restaurants and hotels and DVDs.
 Electricity and gas bills were the main influence on the fall in CPI
The biggest upward pressure on price was from transport, with the average price of petrol rising by 2.4p per litre, compared to a fall of 2.3p a year ago. There was also upward pressure from second hand car prices. If oil prices continue to rise there is a possibility that the CPI may rise in the months ahead, especially with VAT being pushed back up to 17.5% from its temporary 15% figure, in January.
In the year to September, RPI annual inflation fell by 1.4% compared with a 1.3% fall in August. This measure was also affected by the main changes in the CPI components, although a different method used to measure the price of new cars in the RPI resulted in a larger upward contribution.
The RPIX measure, which is RPI excluding mortgage interest rate, was 1.3% in September compared with 1.4% in August.
Compared to the eurozone UK CPI remains high. The latest flash estimate for the eurozone for September shows a figure of -0.3% compared to +1.1% in the UK.
Tags: CPI, Inflation, RPI, RPIX
Posted in Inflation | No Comments »
Monday, October 12th, 2009
UK output prices for all manufactured goods rose by 0.4% in September compared to the same month last year, according to the Office for National Statistics. This is also referred to as ‘factory gate inflation’ and analysts were very surprised by the figure. Only two months ago in July, the figures were showing a fall in price of 1.3% compared to the same month last year, so there has been a very fast turnaround in output prices.
The increase in price largely reflected price rises in petroleum and other manufactured products. But, the ‘narrow’ measure of output prices, which omits volatile items such as food and oil prices, actually rose by 1.4% on an annual basis. It is this latter figure which is particularly worrying, as it reflects ‘core’ inflation.
 Output prices for UK manufactured goods have been rising at a surprising rate. The UK has been hit in recent months by a continuing fall in the value of sterling, which is making imports more expensive. There have also been rises in commodity prices. Both of these taken together are putting pressure on manufacturers to raise their output prices.
The upshot of this is that it looks as though UK inflation is going to be ‘stickier’ than in many other advanced economies. Although the general consensus is that the Bank of England will keep interest rates at 0.5% for the foreseeable future, they may have to think again if these output figures follow through into retail inflation. It will be interesting to see the September retail inflation figures when they are released this week.
In the meantime, the fall in sterling does have a silver lining. Latest figures show that the UK trade deficit fell from £2.6bn in July down to £2.0bn, while the deficit on the trade in goods fell from £6.4bn to £6.2bn, which was the smallest deficit since June 2006. Our exporters are obviously being helped by being able to offer lower export prices as a result of sterling’s weakness.
Tags: Balance of Trade, factory gate prices. sterling, output inflation
Posted in Balance of Trade, Inflation, sterling | No Comments »
Friday, October 9th, 2009
When the UK’s productivity is measured by Gross Domestic Product (GDP) per worker, latest figures show that we are now above Japan, similar to Canada and Germany, although still lower than Italy, France and the US. This is according to new 2008 estimates just published by the Office of National Statistics.
When measured by GDP per hour, which takes account of the different working patterns across countries, then the UK is above Japan and Italy, on a par with Canada and below, France, Germany and the US.
The latest statistics for GDP per worker can be seen in the figure below.
 GDP per worker Source: ONS
What is of even greater importance is that since 1991 the UK has experienced faster productivity growth than all the other G7 countries. When measured by GDP per worker the figures show that the UK’s productivity grew by 39% between 1991 and 2007, which compared to the G7 average (excluding the UK) of 29%.
When GDP per hour worked is used as the measure for productivity the UK increased by 49% from 1991-2007. This represents the fastest growth rate of any G7 country over this period, and compared to the average (excluding the UK) of 36%.
Tags: GDP per hour worked, GDP per worker, productivity
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