Closing summary
The Bank of England governor, Andrew Bailey, has signalled interest rates may have peaked after 10 successive increases in the official cost of borrowing since December 2021.
Speaking in London, Bailey said Threadneedle Street would assess the impact of tighter policy on the economy before sanctioning any fresh moves.
Annual house price growth in the UK turned negative in February for the first time in almost three years, Nationwide data shows, falling to its lowest level since November 2012.
UK mortgage approvals and lending fell in January, further evidence of the housing slowdown, while consumer credit doubled to £1.6bn, as people borrowed more on credit cards (£1.1bn) amid the cost of living crisis, according to Bank of England figures.
In China, the manufacturing sector expanded at its fastest pace in more than a decade in February, as demand recovered after Beijing eased its strict zero Covid policy. The solid PMI readings suggest that the government will set a high GDP growth target, analysts said.
Thank you for reading. We’ll be back tomorrow. Take care, JK
US manufacturing in decline – PMIs
The US manufacturing PMI from the Institute for Supply Management (ISM) has come in a bit weaker than expected.
The main index was 47.7 in February, slightly up from 47.4 in January but worse than the 47.9 expected by analysts. Any reading below 50 indicates contraction; any reading above points to expansion.
🚨🚨🚨🚨🚨
— Matt Weller CFA, CMT (@MWellerFX) March 1, 2023
US ISM Manufacturing PMI prints at 47.7 vs. 47.9 expected.
🚨🚨🚨🚨🚨
The other PMI survey from S&P Global also pointed to a decline in manufacturing, with that index posting 47.3 in February, up slightly from 46.9 in January, but blow the flash estimate of 47.8%.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
US manufacturing remained under intense pressure in February. Although the PMI rose slightly, it continues to signal the steepest downturn outside of pandemic lockdown months since 2009.
Moreover, some of the improvement in output could merely be attributed to faster supplier delivery times, which quickened to the greatest extent since 2009 to facilitate higher production and enable factories to work through previously placed orders. The worry is that new order inflows continue to fall sharply as many companies report disappointing sales, linked in part to a sustained trend towards cost-saving inventory reduction and low levels of confidence at their customers, both at home and abroad. None of this points to a healthy economic situation.
There was some brighter news in that factory jobs growth picked up slightly amid reports of greater success in filling vacancies, and the improvement in supply chains helped reduce input cost inflation. However, rising wage pressures and efforts to raise margins meant average prices for goods leaving the factory gate rose sharply once again, the rate of inflation accelerating for a second straight month to hint at stubbornly high price pressures.
Just Eat Takeaway, Europe’s biggest food delivery company, has reported a €5.7bn loss for 2022, up from €1bn in 2021, caused by a large impairment charge of £4.6bn incurred on acquisitions.
This includes writedowns for the $7.3bn purchase of US firm Grubhub in 2020 and Just Eat’s £6.2bn merger with the Dutch firm Takeaway.com, also in 2020.
The shares fell as much as 10% before recovering to trade up 1.7%. The Amsterdam-based company is under pressure from investors to sell Grubhub but is struggling to find a buyer.
Wall Street has opened slightly lower: the Dow Jones is down 54 points, or 0.2%, at 32,602 while the Nasdaq is little changed at 11,451 and the S&P 00 has slipped 0.2% to 3,961.
Market summary: stocks, metals up on strong China expansion
On the markets, European stocks are pushing cautiously higher. The FTSE 100 index in London is up 54 points, or 0.7%, at 7,930. Germany’s Dax, France’s CAC and Italy’s FTSE MiB are all up nearly 0.2%.
The pound is a tad higher against the dollar at $1.2022, and down 0.9% against the euro at €1.1263.
Crude oil prices have retreated, with Brent crude, the global benchmark, down 0.4% at $83.08 a barrel while US light crude is 0.7% lower at $76.52 a barrel.
Prices for industrial metals have risen after surveys showing a strong expansion in China’s manufacturing sector, following the lifting of Covid restrictions. China is the biggest metals consumer in the world. Benchmark copper gained 1.3% to at $9,080 a tonne while aluminium, zinc, nickel, lead and tin also all rose on the London Metal Exchange.
Updated
German inflation unexpectedly picks up
In Germany, inflation unexpectedly picked up last month driven by higher food prices.
The harmonised index of consumer prices (which is comparable to other European countries) rose to 9.3% from 9.2% in January, according to official figures from Destatis. Analysts had expected it to ease to 9%.
This comes a day after Spain and France also posted unexpected rises, to 6.1% and 7.2% respectively.
Germany’s national inflation rate was 8.7%, the same as in January. Food prices rose 21.8% year-on-year, up from 20.2% in January, while energy prices were 19.1% higher versus 23.1% in January.
Unemployment in Germany, Europe’s biggest economy, fell by 9,900 from the month before to 1.32 million people in January, with the jobless rate at 3% (in seasonally adjusted terms).
Wages rose 3.5% last year while consumer prices climbed 6.9% over the year. This means that real wages, adjusted for inflation, were 3.1% lower than in 2021, marking the third year of declines (including two years of Covid pandemic).
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BOE governor signals rates may have peaked
The Bank of England governor, Andrew Bailey, has signalled interest rates may have peaked after 10 successive increases in the official cost of borrowing since December 2021.
Speaking in London, Bailey said Threadneedle Street would assess the impact of tighter policy on the economy before sanctioning any fresh moves.
However, the governor also warned that the Bank was alert to the risk of repeating the mistakes of the 1970s and would not hesitate to raise rates further from their current 4% should inflationary pressures become embedded.
Bailey voted for a quarter-point increase in interest rates at the last meeting of the Bank’s nine-strong monetary policy committee in February but made clear on Wednesday that he was now adopting a wait-and-see approach.
“At this stage, I would caution against suggesting either that we are done with increasing Bank rate, or that we will inevitably need to do more,” he said. “Some further increase in Bank rate may turn out to be appropriate but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.”
Here is some analysis: How rising interest rates have sent the UK housing market into reverse, from our economics editor Larry Elliott.
Since the turn of the year the news on the economy has been less bad than expected. Growth has been a bit stronger, spending in the shops a touch higher, business and consumer confidence have both picked up.
There has, however, big one big exception to this trend – the state of the housing market. The Nationwide building society reported on Wednesday that prices were down for a sixth month in a row in February, leading to a 1.1% annual drop in property values.
And here’s our full story on the declines in mortgage approvals and lending, and the hefty rise in consumer borrowing such as credit cards.
Britain’s mortgage market has contracted for a fifth month in a row, official figures show, as the jump in interest rates that followed Liz Truss’s September 2022 mini-budget continued to trigger a collapse in demand for new home loans.
The Bank of England said the drop in January took the number of mortgage approvals to the lowest level since 2009, which followed the 2008 financial crash, excluding the dramatic drop after the first Covid-19 lockdown in 2020.
E.ON's UK boss jumps ship to join Germany's Uniper
The UK boss of energy supplier E.ON is jumping ship to join bailed-out German power group Uniper.
Michael Lewis has led German-owned E.on’s UK business, the second largest gas and electricity supplier in the country, since 2017. He has spent three decades in the industry, first with Powergen, which was then taken over by E.on in 2002. He ran E.on’s renewables business and, as UK chief, bought npower to bring E.on’s UK customer base over five million.
Uniper, which owns the Ratcliffe-on-Soar coal power plant in Nottinghamshire, was plunged into crisis last year by the reduction in Russian gas linked to the war in Ukraine and the company was bailed out by the German government.
Lewis has been a powerful voice during the energy crisis which has seen 29 UK suppliers fail, costing billpayers billions of pounds. Last year he told The Observer that the collapsed firms had left a “trail of destruction”.
Lewis said:
After almost 30 years at Powergen and E.on it will be a huge wrench to step away from this company but I am incredibly proud of all we have achieved in those years.
Lewis does not have a start date but E.On has begun the process of finding a successor. At Uniper, he replaces Klaus-Dieter Maubach whose last day in the role was yesterday.
UK farmers call for urgent action to tackle empty shelves
Britain’s farmers have launched a strategy to boost domestic horticulture, just as many supermarket shelves for fresh produce are empty, and as shoppers face limits at major grocers on purchases of tomatoes, cucumbers and peppers.
The National Farmers’ Union (NFU) is calling on government to support its call for better access to workers to pick crops, more access to affordable and sustainable energy, and also fairness in food supply chains. UK growers have been warning for some time – well before the recent shortages in fresh produce became visible in the shops – that they were facing a string of challenges, some of which have been intensified by the pandemic and Brexit.
The NFU estimated that £60m worth of fresh produce was left to rot in fields last year, as growers could not get enough workers to pick their fruit and vegetables at the right time. NFU president Minette Batters said:
The consequences of undervaluing growers can be seen on supermarket shelves right now. Shelves are empty. This is a reality we’ve been warning government about for many months. Without urgent action there are real risks that empty shelves may become more commonplace as British horticulture businesses struggle with unprecedented inflationary pressures, most notably on energy and labour costs.
In recent weeks, growers with glasshouses – needed for growing tomatoes, cucumbers and other crops in northern Europe at this time of year – have complained that they are not receiving government support to heat and light their buildings, at a time of soaring energy bills, while botanical gardens have been eligible for government support.
Since Brexit, there have been government limits on how many overseas workers can come to Britain to work on farms. Ministers have granted 45,000 seasonal worker visas from 1 April, but this is 15,000 more than last year. The farming minister has said there is the possibility of adding a further 10,000 if required.
The NFU is also calling for fairness in the supply chain - particularly at a time when retailers are trying to keep their own costs low so they do not need to pass price increases on to their customers - as well money to invest in productivity and more access to environmental funding schemes.
Martin Emmett, chair of the NFU’s horticulture and potatoes board, said:
For too long, we’ve only had warm words from government about how important the horticulture sector is but no detail on how it wants to achieve growth. ... The time to act is now.
Updated
Bank of England's Bailey: 'Have to monitor carefully how tightening works its way through'
Bank of England governor Andrew Bailey is speaking about the cost of living squeeze and the future path of interest rates at a conference in London.
The central bank has raised rates to 4% at its February meeting in an attempt to bring inflation down towards its 2% target, and further rate hikes are expected. Bailey said this will depend on the economic data:
If we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson.
But equally – second – we have to monitor carefully how the tightening we have already done is working its way through the economy to the prices faced by consumers. Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably.
That is the best contribution monetary policy can make to a fair society.
He went on to say:
At this stage, I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more. Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.
Updated
Viasat takeover of Inmarsat is cleared
The $7.3bn (£5.4bn) takeover of the British satellite company Inmarsat by its US rival Viasat has been cleared, after the UK regulator decided that rivals such as Elon Musk’s Starlink are providing increasing competition.
The Competition and Markets Authority (CMA) had raised significant competition concerns about the deal, saying in October that the merger could result in higher-priced and lower-quality wifi for UK aeroplane passengers. At the time the CMA, which subsequently launched an in-depth investigation into the deal, said that new players in the satellite communications market seeking to target the aviation sector such as Starlink, OneWeb and Telesat may not be able to effectively compete against a combined Inmarsat and Viasat.
“While Viasat and Inmarsat compete closely, the evidence suggests that the merged company will face significant competition in the coming years – from both emerging players like Starlink and from established firms like Intelsat and Panasonic,” said Richard Feasey, chair of the independent inquiry group carrying out the in-depth CMA investigation. “This competition has led us to provisionally conclude that airlines and their UK customers will not be adversely affected by the deal.”
The UK government has already cleared the deal, saying the takeover of Inmarsat did not pose a threat to national security. Inmarsat provides mobile satellite services that underpin email, internet and video conferencing, as well as in-flight wifi and communications services for ships. Its takeover is the California-based Viasat’s largest-ever acquisition.
UK mortgage approvals lowest since 2009 excluding Covid period; consumer credit doubles
The latest Bank of England figures show sharp declines in mortgage approvals and lending in January, as the housing market continues to slow.
There was also a hefty rise in consumer credit, as people borrowed more on credit cards, loans etc as they struggled with soaring food and energy bills.
Net mortgage lending to individuals decreased from £3.1bn to £2.5bn in January.
Net mortgage approvals for house purchases decreased to 39,600 in January from 40,500 in December, marked the fifth consecutive monthly decrease in mortgage approvals. If the onset of the Covid-19 pandemic and period immediately thereafter is excluded (when the housing market ground to a halt), this was the lowest approvals since January 2009 (32,400).
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 21 basis points, to 3.88% in January.
Consumers borrowed an additional £1.6bn in consumer credit, compared with £800m borrowed in December. This was split between £1.1bn of borrowing on credit cards and £500m of borrowing through other forms of consumer credit.
Updated
UK manufacturing production rises for first time in eight months
Over here, the UK manufacturing sector showed a resilient performance in February.
Stabilising client demand and improved supply chains boosted production, while inflationary pressures also eased further, with costs rising at the slowest rate since July 2020.
The final reading for the S&P Global / CIPS UK manufacturing purchasing managers’ index (PMI) rose to 49.3 in February, up from 47.0 in January and the earlier flash estimate (49.2). Although the PMI remained below the neutral mark of 50.0 for the seventh successive month, this was the best reading during that period.
Manufacturing production rose for the first time in eight months, albeit only slightly. The increase was underpinned by signs of firming client demand, with consumer and investment goods the only industries to see new orders increase.
🇬🇧The #UK manufacturing downturn showed further signs of easing in February (#PMI headline at 49.3; Jan 47.0) amid fresh growth in output, stabilising client demand and the first improvement in supply chains since June 2019. Read more: https://t.co/Dqx9nN1PGq @cipsnews pic.twitter.com/WP3KCYwI4y
— S&P Global PMI™ (@SPGlobalPMI) March 1, 2023
Updated
Strong China PMIs point to high GDP growth target
In China, the manufacturing sector expanded at its fastest pace in more than a decade in February, as demand recovered after Beijing eased its strict zero Covid policy. The solid PMI readings suggest that the government will set a high GDP growth target, analysts said.
The official manufacturing and non-manufacturing PMI indices for February came in at 52.6 and 56.3, respectively. This compares with readings of 50.1 and 54.4 respectively in January. The CAIXIN manufacturing PMI rose to 51.6, from 49.2 in January. The numbers beat market expectations.
Iris Pang, chief economist for Greater China at ING, said:
Both manufacturing and non-manufacturing PMIs for February were very strong. Some sub-indices are the highest in several years. This supports our view that the Two Sessions government meeting will set a high GDP growth target.
We believe that the government will set a GDP growth target of 5.5% to 6% at the Two Sessions on 5 March. This set of PMI data gives the government a very good reason to set a high growth target. Even though the recovery is on track, this year will not be easy with the central government requiring local governments to grow their economies with high-quality growth prospects in mind.
Updated
Aston Martin losses double in 2022
Aston Martin has revealed that its losses more than doubled during 2022 as the sportscar maker spent heavily on new models and struggled through supply chain problems hitting the global car industry.
The UK-listed carmaker reported a loss before tax of £495m in 2022, up from £214m the year before, even as sales rose 26% to £1.4bn. It made an operating loss of £118m after adjusting for some one-off costs, less than the £135m expected by analysts.
The company has struggled for years to turn itself around after an overambitious listing on the London Stock Exchange in late 2018. It was taken over in early 2020 by the fashion billionaire Lawrence Stroll, just as the coronavirus pandemic hit.
Since then, Stroll has as the executive chair sought to move Aston Martin’s brand upmarket – with higher prices – and cut its crippling debt pile, including a £650m fundraising in July that took money from Saudi Arabia’s public investment fund.
Aston Martin sold 6,400 cars during 2022 but it was hit by higher spending including reinvestments including marketing and expensive new product launches, as well as the impact of high inflation across its operations. At the same time it spent £287m mainly on developing new models.
Eurozone manufacturing output at nine-month high
Manufacturing production across the eurozone stabilised in February, ending an eight-month run of contracting output. Manufacturers in Italy, Greece and Spain lent the greatest support to factory output in February, while Germany and France trailed behind.
The final reading for the manufacturing PMI from S&P Global came in at 48.5, below the 50 mark that divides contraction from growth. However, the output sub-index improved and rose about that mark to a nine-month high, indicating expansion.
The survey said:
According to survey respondents, easing supplier bottlenecks and improved raw material availability reduced the strain on production schedules. Indeed, supplier delivery times shortened to the greatest extent since May 2009. Consequently, cost pressures faced by goods producers eased considerably once again, with the overall rate of input price inflation slowing to a marginal pace that was the weakest in almost two-and-a-half years.
Key findings:
Final Eurozone Manufacturing PMI at 48.5 (Jan: 48.8). 2-month low
Final Eurozone Manufacturing Output Index at 50.1 (Jan: 48.9). 9-month high
Eurozone Final February Manufacturing PMI confirmed at 48.5
— Mario Cavaggioni (@CavaggioniMario) March 1, 2023
Periphery led the index while Germany and France lagged.
Activity seems recovering after bad Q4 but still not in expansionary territory for the whole Union.
Let see if Chinese reopening now fully on track will help. pic.twitter.com/6TIETa0sJz
Updated
Revolut turns first annual profit as it pushes for UK banking licence
Revolut, the UK’s most valuable fintech company, has made its first annual profit, long-delayed results show.
The London-based firm reported a net profit of £26.3m for 2021 compared with a loss of £223m in 2020. Revenues nearly tripled to £636m.
Revenues from its foreign exchange and wealth division, which includes crypto trading, jumped more than eightfold to almost £350m. Revolut stole a march on most of its rivals when it pushed into cryptocurrency trading in 2017.
The company has been praised as a high-growth success story by leading UK politicians including the chancellor, Jeremy Hunt, but it has also been criticised for the late filing of accounts, as well as EU regulatory breaches and fines, reports our City editor Anna Isaac.
Allegations of an aggressive work environment, which it has denied, have also come under scrutiny as the company pushes toward a valuable UK banking licence.
Revolut did not put a deadline on when it was set to receive a UK banking licence in the 2021 report, instead saying it was “in the advanced stages of its application” to British regulators. It added that revenues topped £850m ($1bn) in the year to December 2022.
Photograph: Pedro Nunes/Reuters
Updated
Here is our full story on the year-on-year drop in UK house prices.
UK home sellers are having to shave an average of £14,000 off the original asking price as the market continues to cool, data shows.
The property website Zoopla also said that in the face of weaker demand, more than 40% of the homes it currently had listed for sale had an asking price that had been lowered to attract “price-sensitive” buyers.
The first homes have gone on sale at British Land’s huge regeneration scheme (worth £5.6bn) at Canada Water in southeast London. The developer is building up to 3,000 new homes and offices with space for 20,000 workers in Rotherhithe, effectively constructing a new London neighbourhood.
Co-op Bank profits rise more than fourfold
Annual profits at the Co-operative Bank (which is no longer part of the wider Co-operative Group) have risen more than fourfold to over £130m, as the bank benefited from rising interest rates.
Pre-tax profits jumped from 31.1m in 2021 to £132.6m in 2022. Net interest income climbed by by 41% to £458m.
Interest rates on mortgages tend to rise faster than on savings products, but the Co-op boss, Nick Slape, said that the bank passes back about 60% of every rate rise to savers.
Speaking on BBC Radio 4’s Today programme, he talked about the rise in fraud.
The fraudsters are getting ever more sophisticated that’s the challenge we have in a digital environment. We put a lot of effort into protecting our customer base and we carry the pain in our P&L [profit & loss statement], we compensate our customers around the 90% mark for fraud.
When asked whether the Co-op, which is owned by private equity and hedge funds, would make another bid for rival TSB, Slape replied:
Nothing planned at all.
However, the Co-op is the frontrunner to buy Sainsbury’s Bank’s £650m loan portfolio, according to reports. When asked whether the Co-op wanted to acquire it, Slape said:
Possibly.
Updated
How low will UK house prices go? Housing experts are predicting price declines of between 5% and 20%.
For example, Lloyds Banking Group, which owns the mortgage lender Halifax, is expecting prices to fall by almost 7% this year, while the upmarket estate agents and property firm Knight Frank has pencilled in a 5% drop.
Freelance consumer journalist Patrick Collinson has looked at what’s going on in other countries.
Updated
Victoria Scholar, head of investment at interactive investor, said:
The housing market is struggling under the weight of lacklustre economic growth, a softening consumer, falling real wages, and rising mortgage rates as the Bank of England continues to raise rates. Potential homeowners appear to be holding off in anticipation that mortgage rates and house prices will cool later this year. Stemming an even steeper slide is the chronic shortage of housing supply in the UK.
According to Zoopla, UK home sellers have had to cut £14,000 from their asking prices on average with 40% of properties having to lower their price online in order to attract buyers. However looking longer term, data from Halifax indicated that over three years from January 2020 to December 2022, house prices have risen by just over 20%, with particular strength for larger properties outside of busy urban areas after the pandemic saw many house buyers hunt for more space for a working from home office as well as a garden. Meanwhile urban areas have struggled with flats in London climbing the least.
Persimmon warns on sales and profits
As reported earlier, the housebuilder Persimmon has also sounded the alarm on the housing market. Dean Finch, the chief executive, said:
The market remains uncertain. Our marketing campaign has helped improve the group’s sales rates in the new year from the lows at the end of 2022, but they still remain lower year on year. We have carefully managed our pricing, recognising the improved value and energy efficiency of our product in these difficult times and sales prices have proved resilient. We responded quickly to stimulate sales, enhance cost controls and preserve cash, promptly slowing new land investment in the fourth quarter of last year.
Nonetheless, the sales rates seen over the last five months mean completions will be down markedly this year and as a consequence, so will margin and profits. However, it is too early to provide firm guidance.
Updated
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said:
Looking ahead, we still expect house prices to fall over the coming months until they are about 8% below their peak. Mortgage rates appear to have hit a floor for now, and households’ real disposable incomes will be squeezed again in April by the withdrawal of energy price subsidies by the government.
In addition, expectations among the public that house prices will fall sharply are well-entrenched — 62% of households expressing a view expected house prices to drop by at least 5% over the next year, according to the BSA’s Q4 Property Tracker Survey —suggesting demand won’t recover until a significant drop has materialised. We have tentatively pencilled in a 5% rise in house prices for 2024, however, reflecting our view that the monetary policy committee will start to reduce interest rates next year.
Independent housing analyst Anthony Codling has tweeted:
House price inflation weakest since November 2012
— Anthony Codling (@anthonycodling) March 1, 2023
The Nationwide painted a rather downbeat picture for house prices this morning, reporting that house price inflation has not been weaker since November 2012https://t.co/ZbTfkHTrHN via @twindighomes
Here’s some instant reaction to the annual drop in house prices.
Tom Bill, head of UK residential research at Knight Frank, said:
While most of the economy has moved on from the mini-Budget, the hangover is longer for the UK housing market. It has led to a mismatch between the most recent anecdotal evidence and the latest data. While last month saw the steepest annual house price decline in more than ten years, activity has been solid so far this year as buyers and sellers adapt to higher mortgage rates.
We expect transaction levels to fall from the heights of the pandemic and prices to decline by 5% this year but the UK housing market is far from being on its knees.
John O’Malley, director of Scotland-based estate agents O’Malley, which has branches in Alloa, Edinburgh, Stirling and West Lothian, said:
When you look at the broader economic backdrop, it’s no surprise both monthly and annual price growth are now in the red. Buyers are wary and many sellers are struggling to come to terms with the fact that their properties are no longer worth what they were six months ago. 2023 will be a tough year for many households and the property market will not be protected from the ongoing cost of living crisis and higher mortgage rates.
Buyer demand has dropped for ten consecutive months and may continue to fall as people start to consider alternative, more affordable accommodation. It is not unusual to see a drop in both supply and demand in February as buyers and sellers alike batten down the hatches and wait for the spring. However, this February, the demand for property was almost half that of last year, while the supply of property was also weaker than usual.
Introduction: Annual house price growth turns negative, falling to weakest level since 2012
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Annual house price growth has moved into negative territory for the first time since June 2020, Nationwide building society said this morning.
The average price of a home declined by 1.1% year-on-year to £257,406 in February, the weakest rate since November 2012. In January, the annual rate showed 1.1% growth.
Prices fell 0.5% compared with January, following a 0.6% drop the month before. It was the sixth monthly decline in a row, and left prices 3.7% below their peak in August.
Robert Gardner, Nationwide’s chief economist, said:
The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.
This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021. Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.
It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.
In another sign that the housing market has slowed sharply, Persimmon, one of the UK’s biggest housebuilders, warned of lower profits this year and slashed its dividend by 75%. It made an underlying pre-tax profit of £1.01bn last year, up 4%.
There’s a slew of other data out today, and Bank of England governor Andrew Bailey will be speaking at a cost of living conference organised by the Brunswick Group and hosted at Coin Street Social Enterprise in London later this morning.
The latest quarterly FTSE reshuffle is expected to lead to the greeting cards retailer Moonpig and the betting firm 888 being relegated from the FTSE-250 index to the FTSE small cap.
The Scottish sausage skin manufacturer Devro may briefly enter the FTSE 250 after “a banger of a performance for shares” which surged following a cash offer for the company, said Susannah Streeter, head of money and markets at Hargreaves Lansdown. The results of the reshuffle, based on yesterday’s closing prices, will be announced later today, probably this afternoon.
The Agenda
8.15am GMT – 8.55am GMT: Spain, Italy, France and Germany S&P Global manufacturing PMIs for February
8.55am GMT: Germany unemployment for February
9am GMT: Eurozone S&P Global manufacturing PMI final for February
9.30am GMT: UK Mortgage approvals and consumer credit for January
9.30am GMT: UK S&P Global manufacturing PMI final for February
10.10am GMT: Bank of England governor Andrew Bailey speech
11am GMT: Italy GDP growth for 2023 (previous: 6.6%)
1pm GMT: Germany inflation for February
3pm GMT: US ISM Manufacturing PMI for February (forecast: 48)
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