Another Record Week
07 / Sep / 2008
Last weeks figures were not only dire but also worse than analysts had been expecting. According to the Halifax, house prices fell by 1.8% in August bringing the annual rate to –12.7%. The Bank’s own figures showed further falls in consumer credit and whilst unsecured debt advanced slightly mortgage lending at £3.231bln is almost 2/3 down on July 2007’s figure of £9.347bln. More worryingly the number of mortgage approvals in July – 33,000 – is the lowest since records began in April 1993 and the 12th consecutive monthly fall! According to the Society of Motor Traders new car registrations in August were 18.6% lower than last year and slipped to the lowest level since 1966.
After all the gloom there may be a glimmer of hope glinting this week. Today August’s producer price index is released and analysts are predicting a monthly decline of 1.2% in input prices and no change in output prices. On an annualised basis input prices should decline from +30.1% to +29% and output prices again unchanged at +10.2%. The main reason for the easing in prices is the recent decline in oil prices (Brent at $102.00pb.) Furthermore oil traders now believe that the current spike in oil prices coupled with the general economic malaise is persuading consumers (domestic and corporate) to minimise energy use thus lowering demand. Wednesday’s industrial production and manufacturing output numbers are expected to reflect falling demand; industrial production declining by 0.1% in the month and 1.5% in the year. Manufacturing output is also expected to fall by 0.1% and 1.1% respectively.
The US Governments’ announcement last night that it was taking both Fannie Mae and Freddie Mac into Federal control has given the markets a real boost. Since these institutions cover half of all US mortgages this move should underpin the US financial system and go a long way to restoring confidence. However, on its own this measure will not stop further declines in US house prices, domestic demand and employment levels.
Oh, Base Rate was kept at 5.00%.