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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK house price correction ‘has some way to go’ after March falls; eurozone and US inflation falls – as it happened

United Kingdom Inflation Recession United States Economy GDP the Office for National Statistics Nationwide Office for National Statistics Spain
An estate agents in Lewes, East Sussex.
An estate agents in Lewes, East Sussex. Photograph: Yui Mok/PA

Closing post

With European stock markets on track for their best week since January, and the pound notching its best month since November, it’s time to wrap up.

What a month it has been – with several banks failing, but the UK cheering us today by avoiding a fall into recession.

But while the cost of living squeeze may be easing in Europe and the US, UK families face higher bills and tax increases in April, which will eat into incomes.

Here are today’s main stories, first on those looming price hikes:

The UK economy:

And in other news:

Back in the UK, shares in cyber-security firm NCC Group have tumbled by a third today after it issued a profits warning.

NCC Group now expects adjusted operating profits of between £28m to £32m this financial year, down from a previous forecast of around £47m.

It blames a “further deterioration in the macro-economic and market environment”, citing job cuts at US technology firms and the banking sector’s troubles, as well as higher interest rates.

Mike Maddison, NCC’s chief executive officer, says falling business confidence is leading to projects being delayed, reduced or cancelled (which is quite concerning, given the importance of cyber security…).

In a statement to the City, NCC says the key factors hitting its performance are:

  • Buying decision delays and cancellations now exacerbated by North America tech sector client layoffs; staffing has not yet normalised, so continued sector layoff rounds are introducing more uncertainty.

  • Turmoil in the Banking sector following the failure of Silicon Valley Bank has further knocked market confidence leading to reduced appetite to spend on technology projects across sectors.

  • Recent interest rate increases in both the US and UK are creating further inflationary challenges for clients.

Shares are down 34% in late-afternoon trading at 100p, on track to close at their lowest since 2011.

Updated

US confidence falls as consumers expect recession

US consumer confidence has taken a knock in March, amid the turmoil in the banking sector.

The University of Michigan’s consumer sentiment index has dropped to 62.0 this month, down from February’s 67.0, a bigger fall than expected.

Americans surveyed were gloomier about current economic conditions, and economic expectations.

Surveys of Consumers director Joanne Hsu explains:

Consumer sentiment fell for the first time in four months, dropping about 8% below February but remaining 4% above a year ago. This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank. Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead.

While sentiment fell across all demographic groups, the declines were sharpest for lower-income, less-educated, and younger consumers, as well as consumers with the top tercile of stock holdings.

Updated

Biden: We are making progress in the fight against inflation

US president Joe Biden has welcomed the drop in the US personal consumption expenditure inflation last month.

In a statement from the White House, Biden says:

We are making progress in the fight against inflation.

Today’s report shows annual inflation down by nearly 30 percent from this summer, against a backdrop of low unemployment and steady growth. The fight against inflation isn’t over, and every day my Administration is working to give families more breathing room.

After decades of talk in Washington, we are taking historic action to lower prescription drug costs for seniors, capping insulin at $35 and allowing Medicare to negotiate lower prices. In February we saw the lowest food inflation in nearly two years.

Biden also urges Congress to lift the debt ceiling:

The last thing our economy needs right now is the reckless threat of a chaotic default. Those threats must be taken off the table.

Wall Street has opened higher, with investors cheered by the drop in core PCE.

The S&P 500 index is up 20 points or 0.5% at 4,071 points.

Paul Ashworth, chief North America economist at Capital Economics, agrees that US inflation is still too high.

Fed officials will be slightly encouraged by the 0.3% m/m increase in the core PCE deflator, with January’s gain trimmed to 0.5%, from 0.6%.

Nevertheless, inflation remains too high, with the annual and three-month-annualised rates both above 4.5%.

Despite dropping last month, US PCE inflation is still uncomfortably high for policymakers, points out Cullen Roche of Discipline Funds.

US core PCE inflation dips

Just in: the US Federal Reserve’s preferred measure of inflation has dropped a little.

The core personal consumption expenditure (PCE) measure rose by 4.6% per year in February, down from 4.7% in January, indicating a slight easing of inflationary pressures.

The headline PCE index also dropped, year-on-year, to 5% from 5.3% in January.

On a monthly basis, both measures rose by 0.3%, less than forecast, and slower than in January.

Wowcher faces investigation into pressure selling practices

The UK’s competition watchdog has launched an investigation into whether ‘deal of the day’ site Wowcher has placed “unfair pressure” on customers by using techniques such as countdown timers to chivvy them into making a purchase.

The Competition and Markets Authority (CMA) said today it is examining whether Wowcher “misled consumers by using countdown timers and other urgency claims”.

The probe will look into the use of timers telling shoppers that deals will soon disappear, as well as other online selling practices used by the business, including how it enrols consumers in its membership scheme.

Sarah Cardell, chief executive of the CMA, said:

“People who buy online should not be pressurised by practices implying that they must act quickly to avoid missing out, when this is not the case.

“We’ll be scrutinising these claims from Wowcher and if we find the company is using misleading online selling tactics, we won’t hesitate to take enforcement action, through the courts if necessary.

“This is the second investigation we have opened into urgency claims, which can be a type of pressure selling, and all companies should take note and review their own practices.

“We’ve published advice to help with this, which sets out clearly those online urgency and price reduction claims that are likely to mislead or put unfair pressure on consumers.”

A Wowcher spokesman said the company will work with the CMA’s investigation:

“Wowcher’s mission has always been to help save our customers money with the best, exclusive offers from thousands of our merchants across the UK.

“This has never been more important than in this challenging economic environment.

“We support the aims of the CMA’s investigation and will work with them to ensure that our customers have the best possible experience when they shop with us.”

FTSE 100 on track for best week since early January

Britain’s blue-chip stock index is on track for its best week since the start of the year.

The FTSE 100 has gained over 3% this week, which would be its best gain since the week to 6 January.

So far this week, the Footsie has gained around 230 points to 7,640, as fears over the banking sector eased following the emergency takeover of Credit Suisse by UBS two weekends ago.

March has been a tough month, though, with the FTSE 100 having lost 3% since the last day of February, hit by banking turmoil.

Victoria Scholar, Head of Investment at interactive investor, explains:

“Gold is on track for its best month since July 2020 thanks driven by strong demand for safe-havens amid the turmoil in the banking sector. The S&P 500 is on track for its second consecutive positive quarter, up 2% so far over the past month.

The FTSE 100 is down over 3% over a one-month period but remains in positive territory year-to-date thanks to a strong January. Endeavour Mining is the top performing stock on the FTSE 100 this month up over 16% while Standard Chartered is the worst performer so far down nearly 22% caught up in the banking sector volatility with the collapse of SVB and the takeover at Credit Suisse.”

This excellent chart from Berenberg shows how eurozone inflation has fallen thanks to a drop in energy costs, after a sharp surge last year:

A chart showing eurozone inflation

They predict that core inflation may remain high in the very near term – but cost pressures should subside in a few months.

Berenberg say:

Eurozone inflation plunged even more than expected in March, dragged down by energy prices returning to base).

The headline rate fell to 6.9% yoy in March from 8.5% in February, below the Reuters consensus expectation of 7.1%. After a post-COVID-19 bounce in 2021, inflation rates surged in 2022 on the back of a huge spike in energy and food prices caused by the Russian invasion of Ukraine.

But European benchmark prices for natural gas (and oil) have declined from their peaks and are now lower than they were a year ago. As a result, the energy price component of the Eurozone’s Harmonised Index of Consumer Prices (HICP) fell by 0.9% yoy in March, versus a 13.7% yoy rise in February. Food prices, however, rose further – increasing 15.4% yoy in March after 15% in February

Putin’s war has also dramatically pushed up food prices as both Russia and Ukraine are major agricultural exporters. Recent poor harvests in some other countries added to the supply troubles.

The pound is on track for its best month since November, helped by the UK’s improving economic outlook.

Sterling has gained around 3% during March, or 3.5 cents, and is trading around $1.238 today.

Francesco Pesole, FX strategist at ING in a note.

“The pound is set to be the best-performing currency of the first quarter of 2023, having gained 2.5% against the dollar”.

“Along with the improvement in the economic outlook, sterling is definitely drawing benefits from the market’s conviction that the Bank of England will need to continue raising rates.”

The financial markets are currently anticipating that America’s central bank will have cut interest rates by the end of this year, as it tries to engineer a ‘soft landing’ for the US economy.

The Bank of England, though, is expected to raise UK interest rates again to 4.5% by the summer and keep them there until 2024.

Amazon workers in Coventry announce six fresh strike dates

Workers at Amazon’s Coventry warehouse have announced six fresh strike dates, as the GMB union prepares to test support for stoppages among staff at another five of the delivery company’s sites.

Strikes at the vast Coventry centre, known as BHX4, began in January – the first industrial action ever taken against Amazon in the UK. Staff are demanding pay of £15 an hour.

The GMB claims to have signed up hundreds of new members among the workforce at Coventry and in Amazon sites further afield since the dispute began.

Amazon announced a fresh pay rise for all its UK staff earlier this month but the union said this amounted to an average of only 1.8%-2.5%, describing it as “an insult”.

Rolls-Royce has appointed its first female finance chief as part of a boardroom shake-up by the chief executive, Tufan Erginbilgic, who has promised to instil a “winning culture” at the engineering and aerospace firm, whose past performance he has criticised.

Helen McCabe will start in the role later this year, taking over from Panos Kakoullis, who has only been in the job since March 2021. She joins from BP, where she had previously worked alongside Erginbilgic, who was named the CEO of Rolls-Royce last year and took up the role at the start of 2023.

Erginbilgic has not been shy about highlighting the 108-year-old engineering firm’s flaws since takeover over, telling staff in January:

“We underperform every key competitor out there.”

During the address, at Rolls-Royce’s main UK manufacturing side in Derby, he said: “Every investment we make, we destroy value.

“We do have a burning platform,” Erginbilgic added, evoking the analogy the former Nokia chief executive Stephen Elop made in 2011 when he told his staff they faced the same stark choice as a worker on an oil platform in the North Sea whose rig was aflame and who had to jump into freezing water to survive.

McCabe’s appointment, amid a broader executive overhaul, heralds major reforms at the British engineering champion, whose stock market value has tumbled by two-thirds over the past five years.

Huawei 'out of crisis mode' despite profits tumble

China’s tech giant Huawei has posted a plunge in profits for last year,

Huawei reported net profit for 2022 totaled 35.6 billion yuan (£4.2bn), a 69% year-on-year decline. That’s the biggest annual decline since 2011, according to calculations by CNBC.

Huawei blamed rising commodity prices and China’s strict pandemic controls last year as reasons for the profit plunge.

The previous year’s profits had also been boosted by the sale of its smartphone brand Honor last year, which boosted earnings in 2021.

Huawei’s business has been hurt by US sanctions in recent years. Washington banned US firms from doing business with Huawei, which cut off access to some chips and software such as Google services for its smartphones.

But today, Huawei insisted it was “out of crisis mode” after reporting a small rise in annual revenue, of 0.9%. It has been spending heavily on research and development to replace the US technology now unavailable due to sanctions.

Chief Financial Officer Meng Wanzhou, daughter of the company’s founder, declared:

“2022 is the year that we pulled ourselves out of crisis mode. We’re back to business as normal.”

Last December, US authorities dismissed bank fraud and other charges which had been brought against Meng Wanzhou, after a deal was reached in 2021.

UK house prices fall at fastest annual rate since 2009

UK house prices have fallen at their fastest annual rate since the aftermath of the financial crisis in 2009, with experts at Nationwide warning that the squeeze on household budgets will make it hard to regain momentum soon.

The price of an average property dropped 3.1% to £257,122 over the year to March, according to Nationwide Building Society’s house price index. That is compared with a 1.1% annual decline in February, my colleague Kalyeena Makortoff reports.

Prices also fell on a month-on-month basis, dropping 0.8% since February. It marked the seventh monthly decline in a row and leaves prices 4.6% below their most recent peak in August, before the housing market was rocked by Liz Truss’s disastrous mini-budget.

“Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago,” Robert Gardner, Nationwide’s chief economist, said.

He said it could take some time before prices rebound, as household finances come under pressure from rising bills and higher mortgage rates.

“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation,” Gardner said.

“Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.”

More here:

Full story: Failed IT systems at Capita fuel fears of cyber-attack on crucial NHS provider

Computer systems have stopped working at outsourcing group Capita, triggering fears that a company that in charge of crucial operations for the NHS and the military could be under cyber-attack.

Staff are understood to have been unable to access IT systems at the outsourcing company since Friday morning, with an early investigation yet to establish the cause.

A spokesperson for Capita, who was unable to access their own email, said in a statement dictated over the phone:

“We are aware of a technical issue with our systems, which we are investigating.”

UK outsourcer Capita investigating IT issue

British outsourcing company Capita says it is investigating a technical issue with its systems, Reuters reports.

Among its clients, the company provides the UK government on a range of services including managing tax and I.T. services for local councils.

Katie Prescott of the Times has more details:

Updated

UK energy firms lose high court challenge over handling of Bulb sale

Three major domestic energy suppliers have lost their high court challenge over the government’s handling of the sale of the collapsed energy firm Bulb.

Scottish Power, British Gas and E.ON claimed an “unfair sale process” led to decisions “to commit billions of pounds of taxpayer money to facilitate the acquisition of a failed business” by the rival firm Octopus Energy.

The three businesses brought legal action against the government, alleging its decision-making process was “flawed and unlawful”.

However, in a ruling on Friday, Lord Justice Singh and Mr Justice Foxton rejected the legal challenge.

At a hearing in London last month, the judges were told that the handling of the sale allegedly prevented British Gas making a “better” offer that could have saved money for taxpayers.

More here:

Octopus have welcomed the ruling, saying:

The High Court’s findings are clear: Octopus paid a fair price for Bulb in an open and competitive process.

The High Court was equally clear that there was no merit at all in the case brought by British Gas and the other legacy companies.

It’s clear that the case was a desperate attempt by those organisations to defend their waning market positions against a more efficient and customer-focused rival.

The Judge recognised the extensive level of information shared by Octopus, the Government and the administrators, which far exceeded what would be normal.

Our focus is now on delivering the best service possible to our new and existing customers.

And here’s John Leiper, chief investment officer at Titan Asset Management, on this month’s drop in eurozone inflation:

“Good to see a decline in euro area inflation although core inflation and the March number held relatively firm.

Bottom line, inflation remains sticky and the ECB will retain its hawkish bias despite the rising risk of recession later this year.”

While the large fall in headline eurozone inflation is welcome, the rise in the core rate is certainly not, says Diego Iscaro, head of European economics at S&P Global Market Intelligence:

But on balance, this morning’s figures still provide some reasons to be (relatively) upbeat, Iscaro adds:

We estimate that core inflation is close to its peak, and the pressure from food prices is also likely to ease during the second quarter. However, we expect core inflation to remain relatively sticky due to a combination of rising nominal wage growth and firms’ profit margins.

The ECB is unlikely to take the view that its fight against inflation is over, following today’s figures. Stress in the financial sector means that there is a higher than normal uncertainty about the ECB’s next move, but we still believe that a further rise in rates in May is certainly on the cards.

..but core inflation rises

Although headline inflation in the eurozone fell this month, underlying inflation has risen.

The eurozone consumer prices index, excluding energy, food, alcohol & tobacco, rose by 5.7% over the last year, up from 5.6% in February.

This means that the fight against inflation is not over, reports Bert Colijn, ING’s senior economist for the eurozone.

Colijn predict the European Central Bank will raise eurozone interest rates by two more quarter-point increases, before rates peak.

Colijn writes:

While March has seen a large drop in inflation, core inflation remains a concern for the ECB.

The potential for core inflation to remain stickier than hoped will be the main reason for the ECB to continue to hike in the near term.

We expect another 25bp hike in May and another in June. As the inflation outlook is starting to look more benign, and recent banking turmoil serves as an illustration that aggressive hikes are not without cost, we expect a peak to be reached thereafter.

Updated

Eurozone inflation falls to 6.9% as energy prices drop

Newsflash: Inflation across the eurozone has fallen, as households benefit from falling energy prices.

Euro area annual inflation is expected to be 6.9% in March, down from 8.5% in February according to a flash estimate from Eurostat which suggests Europe’s cost of living squeeze is easing.

Prices of food, alcohol & tobacco accelerated this month – up by 15.4% year-on-year, from 15.0% in February.

Non-energy industrial goods prices jumped by 6.6%, down from 6.8% in February, while services inflation rose to 5.0%, from 4.8%.

But energy prices were cheaper than a year ago – with prices falling by 0.9%, compared with a 13.7% rise in February.

Russia’s invasion of Ukraine in February 2022 caused energy prices to surge a year ago.

This creates a base effect, pulling eurozone inflation lower this month in comparison. European wholesale gas prices, for example, are below their levels on the day of the invasion, as we showed at the end of last year:

Updated

Security staff have begun a strike at Heathrow today, leading to British Airways cancelling some flights.

The Unite union says 1,400 security officers are striking from today, in a pay dispute after last-ditch talks broke down yesterday when Heathrow Airport Limited “failed to substantially improve its pay offer”.

The strike involves security staff at Terminal Five, which is used exclusively by British Airways, and Campus security guards, who are responsible for checking all cargo that enters the airport.

BA flights to Athens, Amsterdam, Malaga, Vienna, Jersey, Nice, Los Angeles and Seattle have been cancelled so far today, although other flights are leaving from T5 as planned.

Travel journalist Simon Calder reports that the flagship carrier has cancelled over 70 flights altogether.

Heathrow says the airport is operating as usual, and that security is free flowing, with its contingency plans working well.

The airport’s chief executive John Holland-Kaye told Sky News that passengers shouldn’t arrive earlier than usual for their flights:

“I’m here in Terminal Five which is the only terminal that voted for strike action and you’ll see it’s operating as normal.

“We have a lot of colleagues who have come to help us out today – both security officers and managers who are helping out in their purple shirts like me.

“But we also have some other agency, third party, workers who have come in to help us who are very experienced in this kind of security environment, and they’re keeping the airport running smoothly.

“So, Heathrow is operating as normal. If you’re travelling over the Easter period, don’t worry, you’ll have a good journey.

“Please don’t come too early. Three hours is plenty for a long-haul flight, two hours for a short-haul flight, and we will get you to your destination on time.”

In Germany, unemployment has unexpectedly ticked up.

Labour Office figures show a rise in joblessness this month, suggesting that economic headwinds undemined the usual seasonal pick-up in hiring in th spring.

The Federal Labour Office said the number of people out of work increased by 16,000 in seasonally adjusted terms to 2.54 million. Analysts polled by Reuters had expected that figure to remain unchanged.

This has pushed up Germany’s seasonally adjusted unemployment rate by 0.1 percentage points, from 5.5% to 5.6%.

Labour Office head Andrea Nahles says:

“The labour market remained robust overall in March. However, the weak economy is leaving its mark.”

Handelsbanken: House price correction 'has some way to go'

The UK house price correction still has some way to go, predicts Daniel Mahoney, UK Economist at Handelsbanken, after prices fell in March at the fastest rate since 2009.

As he points out, UK mortgage approvals in February were much lower than a year earlier.

And with financial conditions tightening (UK interest rates have been hiked 11 times in a row), prices may keep falling, Mahoney explains:

The Halifax House Price Index had shown an unexpected jump in February m-o-m, but this latest March reading from Nationwide appears to confirm that this was a blip.

Indeed, latest mortgage approval data from the Bank of England, which is a forward-looking indicator, would suggest that the correction in UK-wide house prices has got some way to go. While mortgage approvals ticked up in February, they only registered at 43,500 which is roughly down by about 40% on the year. Furthermore, the tightening in financial conditions following recent market turbulence is likely to reinforce the current downward trend in prices. The peak to trough fall in UK house prices could end up being in the region of 10%.

Updated

UK house price falls: map and charts

This map shows how house prices have cooled in much of the country, compared to a year ago:

A map showing changes in annual house prices in the UK

While these charts illustrate how prices have dropped from their peak last summer:

Charts showing UK house prices to March 2023

Although the UK happily avoided falling into recession this morning, growth has been rather lacklustre.

The upwardly-revised 0.1% increase in GDP in the final quarter of last year leaves the economy only 0.6% larger than a year earlier.

Higher inflation and a tightening in financial conditions have weighed on the UK economy in recent quarters, points out the ONS.

A chart showing UK GDP over recent quarters
A chart showing UK GDP over recent quarters Photograph: Office for National Statistics

There’s little meaningful difference between an economy that is stagnating and one that is growing slightly, points out Martin Beck, chief economic advisor to the EY ITEM Club, says:

The revelation from Q4 2022’s national accounts that the economy grew 0.1% quarter-on-quarter, rather than flatlining as in the preliminary estimate, therefore doesn’t carry much significance.

That said, alongside Q3’s contraction in GDP being revised smaller, it represents the latest in a run of upside surprises and suggests the economy has displayed a welcome degree of resilience, despite pressure from high inflation and expensive energy.

Jeremy Leaf, north London estate agent, reports that house buyers and sellers are negotiating hard, resulting in prices ‘softening’:

‘Although these figures show house price growth is still slowing, we have seen signs of improvement over the last few months at the sharp end.

‘Clearly the rise in mortgage rates and cost of living continues to weigh heavily. However, buyers have been tempted back by more choice and less competition compared with much of 2021 and 2022 as the balance between supply and demand improves.

‘If anything, the passage of time has made the reasons for moving more compelling but buyers and sellers want to ensure they are not caught out financially so are trying to negotiate best possible terms, which has led to some price softening.’

Why house prices are falling at fastest rate since 2009

Many analysts are blaming the chaos caused by the Truss-Kwarteng mini-budget for the slide in house prices.

UK borrowing costs surged following the announcement of large unfunded tax cuts, which drove up mortgage rates. They have fallen back since, though, as Jeremy Hunt unwound much of the mini-budget measures.

Tom Bill, head of UK residential research at Knight Frank, warns that the reverberations from the mini-budget “won’t disappear overnight”.

After effectively shutting down for Christmas in September, the property market turned back on in January as stability returned to Westminster and the mortgage market.

Activity has been solid this year as buyers accept the new normal for mortgage rates. For anyone with memories that stretch further back than 2008, it looks very much like the old normal. That said, more financial pain will enter the system as owners move onto higher fixed-rate deals and combined with an increase in supply from the lows of the pandemic, we expect UK prices to fall by a few percent this year.”

Victoria Scholar, head of investment at interactive investor, says some potential buyers are holding off, in the hope that prices will continue to fall:

The UK housing market has been in disarray since the fiscal fiasco around the mini-budget last September which sent mortgage rates sharply higher while many mortgage deals were pulled from the market.

Since then, although mortgage rates have been normalising, house prices have been hurt by rising interest rates from the Bank of England, sluggish economic growth, falling real wages and soft consumer confidence. Many would be buyers are holding off in anticipation that inflation, house prices and mortgage rates will cool further this year, helping the market to become more affordable and enticing buyers back.”

Jason Tebb, chief executive officer of property search website OnTheMarket.com, reports that the market is continuing to rebalance, as higher mortgage rates and inflation mean purchasers have less buying power.

“With March seeing a further decline in annual house price growth, the adjusting and rebalancing of the market continues.

Rising interest rates, combined with a higher cost of living have contributed to a slowdown in activity, inevitably impacting the confidence of the average property-seeking consumer in the short term. Pressure on household budgets has been considerable and is not yet easing, although many believe inflation and interest rates are close to their peak.

Prices falling faster in the South

There’s a North-South divide in UK house prices.

Across northern England overall (the North, North West, Yorkshire & The Humber, East Midlands and West Midlands), prices were flat year-on-year in the last quarter.

But in southern England (the South West, Outer South East, Outer Metropolitan, London and East Anglia), they fell 1.1% compared with Q1 2022.

UK house prices

Updated

Northern Ireland saw “a noticeable slowing in annual house price growth”, although prices were still up 1.3% year-on-year, Nationwide reports.

In Wales, annual house price growth turned negative – down from +4.5% to -0.7%.

Updated

Most regions see small year-on-year house price falls

House prices in nine out of 13 British regions recorded annual house price declines in the first quarter of this year, Nationwide reports.

Chief economist Robert Gardner says:

Scotland remained the weakest performing region with prices down 3.1% compared with a year ago, a sharp slowing from the 3.3% year-on-year increase the previous quarter.

East Anglia, which was the strongest performing region last quarter, saw a significant slowdown, with prices falling 1.8% year-on-year, making it the weakest performing English region. The neighbouring Outer South East saw a 1.5% yearon-year decline, while London saw a 1.4% fall.

UK house prices by regions

The UK housing market may remain weak in the coming months.

Nationwide’s chief economist, Robert Gardner, says:

“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.

Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.

UK house prices in biggest fall since 2009

UK house prices are falling at the fastest annual rate since the aftermath of the financial crisis, new data from Nationwide shows.

Nationwide reports that UK house prices fell for the seventh month running in March, as the aftermath from the disastrous mini-budget continued to hammer the housing market.

This month, they fell by 3.1% compared to a year ago, which is the largest annual decline since July 2009, Nationwide Building Society said.

Across the UK, prices fell by 0.8% month on month, leaving the average UK house price at £257,122.

All regions of the UK saw a slowing in price growth in Q1, with most seeing small year-on-year falls. West Midlands was the strongest performing region, while Scotland remained the weakest.

Robert Gardner, Nationwide’s chief economist, explains:

“March saw a further decline in annual house price growth, with prices down 3.1% compared with the same month last year. March also saw a further monthly price fall (-0.8%) – the seventh in a row – which leaves prices 4.6% below their August peak (after taking account of seasonal effects).

“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago.

Nationwide house price index to March

Updated

Real households’ disposable income (RHDI) increased by 1.3% in the October-December quarter, the ONS reports.

That follows four consecutive quarters of negative growth, as people’s income was squeezed by rising inflation.

Disposable income was boosted by the UK’s Energy Bills Support Scheme – the £400 paid to households over the last six months.

Those payments are ending today, though.

The UK services sector grew by 0.1% in the final quarter of last year, the ONS reports.

Builders had a good quarter, with the construction sector growing by 1.3%.

But the production sector stagnated, with growth was flat in Quarter 4 2022.

However, the UK economy is still below its pre-pandemic level.

Quarterly GDP in Quarter 4 2022 was 0.6% below its pre-coronavirus (COVID-19) level set in Q4 2019, which has been revised up from the previous estimate of 0.8% below.

GDP is now estimated to have increased by 4.1% in 2022, revised up from the previous estimate of 4.0%.

Another boost – the Office for National Statistics has revised up UK GDP in the third quarter of last year.

GDP is now thought to have only fallen by 0.1% in July-September, better than the first estimate of a 0.2% decline.

UK avoids recession after growing in Q4 2022

Newsflash: Britain has avoided falling into recession at the end of last year

New data from the Office for National Statistics has shown that national output grew by 0.1% the final three months of 2022 – better than the earlier estimate of no change in GDP in October-December.

The economy shrank in the third quarter of last year, but today’s data confirms that the economy has not shrunk for two successive quarters which is the technical definition of recession.

Update: ONS director of economic statistics Darren Morgan explains that new data shows that the UK’s telecommunications, construction and manufacturing firms all fared better than initially thought in the latest quarter.

More to follow….

Updated

UK business confidence hits ten-month high

Encouragingly, UK business confidence has risen to its highest level since May 2022.

The Lloyds Bank Business Barometer, released this morning, has risen this month by 11 points to 32%, helped by rising optimism about the outlook for the economy.

Overall economic optimism also increased this month. And pricing expectations, which are being watched by the Bank of England amid worries about ‘greedflation’, cooled to a six-month low.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, says:

“Business confidence has seen a surge this month with economic optimism and trading prospects bolstering firms. With hiring intentions improving, we may see employment growth picking up in the coming months. Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease.

“Although the measures in the Budget were widely trailed, it is yet to be seen what the full impact of the Chancellor’s announcement, along with the surprise rise in inflation and recent increase in interest rates, will have had on business confidence.”

A lot of people in government will be hoping don’t get a downward revision to UK GDP this morning, says Michael Hewson of CMC Markets.

When the numbers were last adjusted the UK economy managed to avoid a technical recession by the skin of its teeth, coming in at 0%, after a -0.2% contraction in Q3.

The rebound in Q4 was helped in some part by a strong rebound in consumer spending due to the Football World Cup in Qatar, and today’s final adjustment will hope that this holds, with personal consumption expected to come in at 0.1%.

Recent retail updates have offered encouragement that consumers are still spending, albeit more cautiously, while the construction sector has also shown signs of some improvement. Business investment also saw a rebound in Q4 after a slowdown in Q3.

Even with the optics of avoiding a technical recession, the outlook for the UK economy remains challenging with headline inflation still close to 10%, and consumer confidence still very fragile, but the rebound seen in retail sales seen in January and February offers hope that Q1 could see some growth after a difficult end to 2022.

Introduction: UK GDP and Nationwide house price index in focus

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK economy is in focus today as we get updated GDP data covering the final quarter of last year, and a healthcheck on the housing market this month.

At 7am, the Office for National Statistics releases its UK “quarterly national accounts” for October to December 2022, which gives a detailed view of how the economy performed.

The first estimate of GDP in Q4 2022, released in February, showed that the economy stagnated. That meant Britain narrowly avoided a technical recession, having also shrunk in Q3.

Today’s data could confirm that, and will also give more detail about different parts of the economy fared. It will also show how households’ disposable income changed in the quarter, how prices changed over the quarter, and if households saved more, or less.

Building society Nationwide releases its March House Price Index at 7am too. Economists predict that average prices fell again this month, down by 0.3% after a 0.5% month-on-month drop in February.

It’ll be a busy day for economic news, as we also get new inflation data on both sides of the Atlantic.

Eurozone inflation is forecast to have slowed this month, to 7.1% from 8.5% in February, after inflation in Spain and Germany fell yesterday.

But underlying inflation is not falling as fast, as Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:

First CPI figures from Spain and Germany confirmed that headline inflation in Europe eased by a big chunk in March, thanks to the base effect - as we now compare war months to war months.

Released yesterday, the German inflation fell from 9.3% to 7.8%, and inflation in Spain halved, from 6% to 3.1%.

Chic, but not enough.

When we filter out the energy and food prices – which exploded with the war – the inflation picture is not as optimistic. In fact, core inflation in Spain barely fell this month, from 7.6% to 7.5%.

And core inflation in the Eurozone is expected to rise to a fresh record high.

The US Personal Consumption Expenditures (PCE) index, is released too. A month ago, PCE rose unexpectedly to 5.4%, adding pressure for more rate hikes.

Core PCE, which is the Federal Reserve’s favourite inflation measure, is forecast to remain at 4.7% this month, matching January’s figure.

The agenda

  • 7am BST: UK GDP quarterly national accounts: October to December 2022

  • 7am BST: UK Balance of payments: October to December 2022

  • 7am BST: Nationwide’s house price index for March

  • 7am BST: German retail sales for February

  • 10am BST: Eurozone inflation (flash estimate) for March

  • 10am BST: Eurozone unemployment

  • 1.30pm BST: US PCE inflation report for February

  • 3pm BST: University of Michigan survey of US consumer sentiment.

Updated

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