Consumer spending and house prices pick up

Published 11th Aug 2009

• July retail sales 3.6% higher year-on-year
• Surveyors regaining optimism on house prices


Stronger spending on the high street and a pick up in activity in the housing market provided fresh evidence today that the British economy is emerging slowly from its steepest postwar decline.

The Royal Institution of Chartered Surveyors said its members were more upbeat about the outlook for house prices than they have been since the property market peaked in the spring of 2007, while the British Retail Consortium said good weather and bargain offers had tempted consumers into the shops last month.

But despite the more positive tone of the monthly snapshots of the two key sectors of the economy, both RICS and the BRC warned that recovery was tentative.

Jeremy Leaf, spokesman for RICS, said although demand for homes was rising, it was still low "from a historical perspective". Despite surveys from the Halifax and the Nationwide pointing to a summer rebound in house prices, RICS said that only 14% of agents had reported rising property values in the latest three months, with 23% recording a fall and 62% no change.

A balance of +8% of estate agents believe property prices will rise over the coming three months – the highest balance since April 2007 – but Leaf said it was a lack of supply that was causing the increase.

"Significantly, the more positive news on prices – at least in some parts of the country – may prompt more properties to come on to the market," Leaf said. "If mortgage availability remains insufficient to meet the increase in buyer demand, then it is possible that prices may slip back again, especially if unemployment continues to rise and mortgage rates increase."

The BRC said retail sales in July were 3.6% higher than in the same month a year ago, but only 1.8% higher when the increase in floorspace over the past 12 months was accounted for.

Stephen Robertson, director general of the BRC, said there was evidence that Britons were taking fewer holidays this summer and using the money saved to smarten up their homes.

"July showed us both sides of the British summer and gave some parts of retailing a much-needed boost," Robertson said. "Seasonal clothing clearances did well early in the month with good summer food sales as the heatwave continued. The largely cooler, wetter second half of the month turned attention indoors, helping sales of furniture and homewares – which have been under pressure throughout the downturn."

The BRC warned, however, that some retailers had been forced to slash prices in order to attract business and Robertson said it would take time for consumer spending to recover from the deep downturn of the past two years. "There is a sense among some customers that the beginning of the end of recession is here, but rising unemployment and job-loss fears will continue to hold back the widespread return of consumer confidence for some time yet."

Source: ' Guardian '

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