(Bloomberg) — Britain’s economy is showing signs of unexpected resilience in a batch of data published Thursday, firming up the case for another interest-rate increase.
Robust figures showing mortgage approvals bouncing back to a five-month high, stronger consumer borrowing and an upward revision to a closely-watched survey of purchasing managers all suggested an economy that’s likely to eek out more growth than expected. Separate figures on inflation expectations also indicated firms expect an even sharper rise in their own prices over the next year.
Together, the readings are likely to lock in bets on a quarter-point rate-hike from the Bank of England on May 11 and fuel speculation of further increases in the months ahead. That marks a sharp contrast with the US, where the Federal Reserve indicated Wednesday that it may pause a rapid series of rate increases.
In Britain, it’s the housing market that’s surprising on the upside. Economists had been expecting property prices to fall as much as 10% this year after a jump in mortgage rates. Instead, the BOE showed the number of approvals for new loans strengthened to a five-month high of 52,000 in March from 44,100 the previous month.
“The UK housing market continues its convincing rebound following the chaos of the mini-Budget,” said Tom Bill, head of UK residential research at Knight Frank. “Price declines appear to be bottoming out and transactions clearly hit their low-point in January. Buyers have accepted the new normal for mortgage rates as stability returns to the lending market.”
That forward-looking measure chimes with reports in the past few weeks from lenders Nationwide Building Society and Halifax showing prices are rising. While net lending for property purchases stalled in March after rising £700 million ($880 million) the month before, the approvals figure gives an indication of how activity may unfold in the months ahead.
The housing market is steady despite the average interest rate on newly drawn mortgages picking up to 4.41% in March, up from 4.24%, according to BOE data published Thursday.
What Bloomberg Economics Says …
“Mortgage approvals increased in March as some households took advantage of mortgage rates edging down from recent highs. While the collapse in the demand for homes may be bottoming out, approvals remain at levels that point to subdued activity and imply the correction in the UK housing market is not over yet.”
—Niraj Shah, Bloomberg Economics. Click for the REACT.
Imogen Pattison, economist at Capital Economics, cautioned that mortgage approvals are unlikely to rise further from their “still weak level.”
“We don’t think that mortgage rates can fall any further until the Bank of England cuts interest rates, which isn’t yet on the horizon,” she said.
Money markets are almost fully pricing in a quarter-point increase in the BOE’s benchmark lending rate to 4.5% on May 11 and a peak of 5% by September.
Other indicators released Thursday included:
Consumer borrowing also grew strongly in the latest month, rising £1.6 billion in March, more than economists had expected. Those figures cover car loans, credit cards and personal lines of credit.
The final estimate of the composite purchasing managers’ index pointed to the UK private sector growing at its fastest pace in a year. It rose further into growth territory to a reading of 54.9 in April, up sharply from the first estimate of 53.9.
The BOE’s monthly decision maker panel showed that chief financial officers downgraded their year-ahead inflation expectations despite predicting a sharper increase in their own output prices. Year-ahead output price inflation was expected to be 5.9% in April, up from 5.3% the previous month.
Money supply figures continued to indicate weakness in the economy. The BOE’s M4 measure fell sharply in the month of March, reducing growth from a year ago to 0.4% from 1.1% the previous month.
Read more:
Powell Opens Door to June Pause, Stresses Inflation Job Not Done
UK House Prices Rise for First Time in Eight Months
UK Economists See One More Rate Hike From Bank of England
Thatcher Adviser Says BOE Is ‘Hopelessly’ Wrong on Inflation
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
