UK House prices and services boost recovery hopes

From Times Online

May 6, 2009

 

Elizabeth Judge

Hopes that Britain is set to emerge from the worst of the recession were lifted today with new figures revealing a dramatic ease in the slump in the country's services sector and a slowdown in the decline in house prices.

Figures from CPIS/Markit showed that the closely watched guage of activity at service companies - which range from financial services business to restaurants and account for nearly three-quarters of the country's Gross Domestic Product (GDP) - rose to 48.7 in April, the highest reading since August 2008 and the biggest rise in the index since April 1999.

Although any figure below 50 indicates contraction, the figure, up from 45.5 in March, was well above analysts' expectations. Nearly half of companies questioned said they expected acitivity to increase in a year's time.

In a further boost to hopes that the economy could be set to turn a corner, figures from Halifax revealed a slowdown in the rate of falling house prices.

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The House Price Index revealed that the average UK house price declined by 1.7 per cent in April - compared with a 1.9 per cent drop in March.

However, the survey showed that prices remain down 22.5 per cent from their August 2007 peak of £199,612 at £154,716. Prices were last at this level in April 2004.

The new data is the latest in a slew of more upbeat news about Britain's battered economy. Recent figures from Revenue and Customs showed that home sales jumped 40 per cent in March with 60,000 homes worth at least £40,000 each sold, compared with 43,000 flats and houses sold in February.

Another recent Markit survey revealed that the construction industry contracted at its slowest pace in seven months in April.

Today's data comes ahead of tomorrow's Bank of England's interest rate meeting. The Bank is widely expected to keep rates on hold, at a record low of 0.5 per cent.

Paul Smith, economist at Markit, cautioned that, despite the much slower rate of contraction in the service sector, it was too early to consider a return to growth.

Rising unemployment and the weak housing market would continue to weigh on companies providing services to consumer, he said.

Source The times online.co.uk