UK growth slows; London house prices fall – as it happened

Graeme Wearden

from on 2017-09-29 15:25 (#33K1N)

All the day's economic and financial news, including new UK GDP figures, Nationwide house prices, and the latest from BoE governor Mark Carney

4.25pm BST

Time to wrap up.

A blizzard of economic data has highlighted problems in the UK economy today.

"The deterioration in the UK's current account position is disappointing, as it underlines that the sharp devaluation in Sterling has not fed through into a better trade position with the rest of the world.

3.57pm BST

We need to make the Bank of England more permeable and comprehensible, Mark Carney concludes, so that the public understands what it's up to.

We need to do a much better job of taking bite-sized bits of analysis, cut them and send them out so people can grab them understand what the trade-offs are in monetary policy, why the Phillips Curve has gone down...

How much capital the banks really do have, and if house prices go down by a third what would happen to the banking sector.

Mark #Carney admits Bank isn't reaching the public. "Traditional Bank communication isn't working" he says during traditional speech . pic.twitter.com/JMF6twCbMV

3.36pm BST

Carney then explains why he doesn't support calls for a new strategic body, involving the Treasury, to oversee systemic risk issues.

Our current arrangement does involve picking up the phone when the chancellor phones...and phoning him up too when there's a financial stability problem, says Carney.

3.30pm BST

Mark Carney is wrapping up his two-conference on central bank independence now.

Governor Carney says the consensus from the meeting is that Bank of England independence has worked, but with several buts.

Everywhere I'm asked, when are we going to tackle the 'too big to fail' problem, and its fundamental unfairness.

2.54pm BST

Professor Ngaire Woods of Oxford University takes issue with Willem Buiter's comments that central bankers should stick to monetary policy.

She warns that this will simply make the Bank of England look remote and uncaring.

The problem with a strict interpretation [of a central bank mandate] is that central banks will look like what most of the people in most countries think the elite look like -- people who are just not listening.

2.51pm BST

Clearly no-one told Willem Buiter that the Bank of England is having a celebration this week....

Buiter really delivered his message. Blew fresh air into the room by criticizing the BoE vast extended mandate (at their 20 yrs celebration) https://t.co/lzH8c8H7Ez

2.36pm BST

Back at the Bank of England's conference, Citigroup's Willem Buiter is delivering a forensic explanation of central bankers' failings since the financial crisis began.

Buiter says central bank independence is under threat because the bankers themselves have failed to 'stick to their knitting', and instead have got involved in politics.

pic.twitter.com/wBbIYKUVE6

Central banks have some output legitimacy, but have very little input legitimacy.

Citi's Willem Buiter is sticking the boot into CBs. "The conduct of MP has been at best moderately competent". Where's the popcorn? pic.twitter.com/eTKPkGJhZy

2.06pm BST

This drop in London house prices could be a "milestone" for prices in the capital, says Vicky Fowler, partner at law firm Gowling WLG.

She believes that falling real wages are to blame, rather than an exodus of overseas buyers.

A recent Mayoral report highlighted that overseas investors count for just one in ten of the central London properties in current ownership. Recent figures highlighting a widespread decrease in wage levels throughout the UK could, therefore, be having more of an effect on the capital's property market than originally thought.

"Indeed, with Sadiq Khan having recently committed to the building of more affordable homes, one wonders if this could be the beginning of a downward trend where the proportion of London's properly affordable homes grows significantly and a corresponding downward pressure on land values".

1.44pm BST

I missed this earlier (under the deluge of UK data), but eurozone inflation has come in below forecasts this month.

Eurostat's 'flash' estimate shows that prices in the euro area only rose by 1.5% in September, the same as in August. Economists had expected a rise to 1.6%.

Sep Eurozone CPI inflation flat at 1.5%yoy,core fell to 1.1% (from 1.2%). Both softer than expected & will keep #ECB cautious on QE tapering

1.10pm BST

Looking back at house prices... this charts shows how London properties are still waaaay beyond the average earner, despite dropping 0.6% over the last year.

London house prices: if 29% lower now it would match price to earnings ratio for next highest UK region. 47% lower to match UK av. pic.twitter.com/7Hricpk9XK

12.52pm BST

Christine Lagarde is also asked whether digital currencies could eventually mean that monetary policy becomes redundant.

Q: If currencies are truly global...could we reach a point where exchange rate targeting is necessary as that's the only way that markets can decide the strength of a country's economy?

12.46pm BST

Back on digital currencies....Christine Lagarde suggests that they could be included in the IMF's own basket of currencies, its 'special drawing rights'.

Lagarde floats idea of digital SDR, possibly with digital currencies in basket #20YearsOn #fintech @izakaminska

12.35pm BST

Lagarde warns that policymakers must remember that new technologies must work for all.

This was neglected when everyone was "beating their chests" about how globalisation was helping the world economy to grow.

12.28pm BST

Christine Lagarde also predicts a day when artificial intelligence plays a much bigger role in running the economy.

She tells the Bank of England conference that artificial intelligence is improving fast. Even the world's best Go players have found themselves outmatched by computers, who could self-learn and develop better strategies.

Clearly the global economy is vastly more complex than a game of Go. But over the next generation machines will almost certainly play a much larger role in assisting policymakers offering realtime forecasts, spotting bubbles and uncovering complex financial links.

"Even with the best algorithms and machines, targets will be missed, crises will occur, mistakes will be made. But can machines really be held accountable - to the young couple unable to buy a house, to the working mother finding herself unemployed?

They've clearly slipped something in the tea, @IMFNews Lagarde now talking about time machines and robot central bankers

12.23pm BST

Christine Lagarde, the head of the International Monetary Fund, has warned central bankers not to close their eyes and ears to the rise of digital currencies.

She's giving a speech on what the global economy will look like in 20 years, at the Bank of England's conference on central bank independence in London today.

"So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money.

#20YearsOn @IMFNews @Lagarde: virtual currencies could in future replace $ as choice for countries looking to peg FX 'call it $-isation 2.0' pic.twitter.com/I7lGKsfzus

IMF MD Christine Lagarde thinks "It would be wise to not dismiss virtual currencies" at BoE Independence Conference. pic.twitter.com/BAwfzwiobg

11.50am BST

Sterling has fallen, following the news that Britain's economy grew slower than expected over the last year.

The pound has dropped by over half a cent against the US dollar to $1.338, which is nearly a two-week low.

Softer GDP data for the second quarter of 1.5%, down from previous estimates of 1.7%, triggered the slide in the pound, which was already looking a little vulnerable following recent moves.

Sell - - Juncker says 'miracles' needed to get sufficient progress on Brexit by end October to move to trade talks - @AFP in Tallinn

10.58am BST

Adam Posen, a former Bank of England policymaker, says central bankers cannot ignore the fact that they make us all richer, or poorer, by their actions.

Posen was speaking at the Bank's conference on independence (you can follow it live, here).

Adam Posen: disagreement among central bankers about whether, and to what extent, they should comment on fiscal policy. #20YearsOn

Posen: not long ago, Draghi's call last week for higher wages and stronger unions would have been anathema to central bankers. #20YearsOn

10.11am BST

In more disappointing news, the UK's current account deficit has widened (yes, there's a lot of data out this morning).

The ONS reports that the current account deficit jumped to 23.2bn in April to June, up from 22.3bn in January to March.

10.04am BST

New figures also show that Britain's consumers continue to ramp up their borrowings.

Figures show that consumer credit jumped by 1.58bn in August, up from 1.2bn in July.

UK retail sales and consumer credit. Buy now, pay later economics pic.twitter.com/5DgA3Ng5on

Year-on-year growth in consumer credit remained at 9.8% in August. Still elevated, but down from the 10.9% peak in November 2016 pic.twitter.com/F3XlWZsQ1u

9.49am BST

Worryingly, the ONS also warns that Britain's service sector had a bad July, with its "Index of Services" decreasing by 0.2% during the month.

The ONS says:

9.42am BST

These new UK growth figures also show that business investment has picked up, but the economy is still barely growing once you adjust for population changes.

Here's som key points:

9.35am BST

Breaking: Britain's annual growth rate has been revised down.

UK GDP rose by just 1.5% annually in the second quarter of 2017, new figures from the Office for National Statistics show. That's down from an earlier estimate of 1.7%, and is the slowest annual growth since 2013.

UK final Q2 GDP slightly softer than expected year-on-year at +1.5% #GDP #GBP pic.twitter.com/IaZzRNajtE

UK economic growth slows to 1.5% in Q2, the lowest in four years and half the rate it was three years ago. pic.twitter.com/G7YMGk1xQO

9.16am BST

Brexit has helped to push London's housing market to an 'inflection point', says Nicholas Finn, executive director of Garrington Property Finders.

"The softening of prices was initially led by the capital's prime market, which was knocked sideways both by Brexit and in the wake of the introduction of higher rates of stamp duty for high-value homes.

"But it is now spreading from the central boroughs - which saw prices rise fastest during the boom - to other areas where the growth came later.

9.13am BST

The decline in London house prices will make it a little easier for people to break into the housing market (although with average prices of 471,761, the capital is well beyond most pay packets).

Here's Hannah Maundrell, editor in chief of money.co.uk, says:

"The market seems to be cooling slightly in London which will hopefully give people more of a chance to get on the housing ladder - despite still being the most expensive region.

"Prices are still on the rise for the rest of the country, with the East Midlands seeing the greatest price increase. It's important here to make sure you do your research before you buy to get the best deal.

9.08am BST

Here are some more charts from the Nationwide house price survey (details start here, if you're just joining us)

9.02am BST

Mark Carney also insists that the Bank of England isn't to blame for economic inequality.

Asked if capitalism is broken, the BoE governor tells the Today Programme there are two foundations of prosperity - price stability (steady inflation), and financial stability (banks that don't blow up).

The gap between rich and poor are crucial issues, but these are issues for the government and broader society. They are not the responsibility of the Bank of England.

The people who get hurt when inflation goes up, or banks go down, are the poorest people in society. Without question, time and time again.

Our job is to make sure that doesn't happen, then the taxpayer doesn't have to bailout someone in the City.

8.47am BST

Mark Carney, governor of the Bank of England, has just gone a few rounds with John Humphrys on the Today Programme.

Carney has given another hint that UK interest rates could rise "in the coming months", if the economy continues on its current course.

Very generous of Bank of England governor Carney to set the tone of Tory Party conference with warning that interest rates likely to rise in November

We think banks have been giving too much credit for a relatively good economic environment, and not being as disciplined as they should be about their underwriting standards and their pricing on this debt.

We have a responsibility to identify risks across the economy - and come on the Today Programme, go round the country, and highlight where there are emerging vulnerabilities.

Hopefully we have powers to deal with them, but at least we have to surface them.

8.21am BST

London's 'unsustainable' house price boom is over, and not before time, says Alex Gosling, CEO of online estate agents HouseSimple.com.

The London property market has enjoyed almost a decade of phenomenal growth. But year after year of double digit growth was unsustainable and inevitably going to come to an end at some point. That point looks like now."

The Government's reform of the stamp duty bands and the introduction of a second home stamp duty surcharge have hit the London housing market more than any other region.

Their wish may well come true."

8.16am BST

This chart from housing expert Neal Hudson shows how the UK housing market has cooled this year.

Nationwide UK house prices up 2% so far this year pic.twitter.com/GeOVqZtWug

8.02am BST

Nationwide also reports that prices in the North of England are rising faster than in the South.

And not before time, arguably, as the gap has doubled over last 10 years. It now costs an extra 171,000 buy a house in the South of England.

7.58am BST

The real shock isn't that London house prices are falling, it's that they rose so high for so long.

So argues Lee James Pendleton, head of independent estate agents James Pendleton. He hopes that a drop in prices will help more people into the market.

"London has been the torchbearer of quite unbelievable growth in recent years but it has been an overvalued market for at least the last three years.

"This shows vendors and agents are becoming more realistic but you've got to use an agent that is going to tell you what you need hear. People have got so used to prices going up and the result is too many people have been priced out. London cooling is going to really engage buyers and put us on a better, more stable footing towards the end of the year.

7.55am BST

Jonathan Samuels, CEO of property lender, Octane Capital, reckons a correction to London prices was overdue.

"The London property market has been the victim of its own extraordinary success.

Prices in the capital rose to such a level that a correction was always on the cards.

7.53am BST

Jeremy Leaf, a north London estate agent, says house prices in London are now falling because they rose beyond the reach of most people.

Plus, potential buyers are also cautious because the Bank of England may raise interest rates soon. Brexit doesn't help, either.

The London market is struggling for mainly affordability reasons and it is only those sellers who recognise the changed market conditions that are doing deals.

'Buyers and sellers are still nervous about prospects for the market in view of lack of perceived progress in Brexit negotiations and concerns about imminent rises in interest rates.'

7.41am BST

7.38am BST

BREAKING: London house prices have fallen for the first time since the depths of the financial crisis.

Prices in the capital fell by 0.6%, annually, in the last quarter, according to a new survey from the Nationwide building society.

Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country. London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6%

Consequently, London was the weakest performing region for the first time since 2005.

Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices.

7.14am BST

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

Today we get a new, more detailed estimate on UK growth in the second quarter of this year. It's likely to confirm that GDP rose by a mere 0.3%, and will also show how business investment held up during the quarter.

Revisions revisions. On Friday, households will appear richer, companies poorer. And the UK will save less. https://t.co/GoXRBcwkk9 via @FT

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