UK house prices rise at fastest pace since 2014; fuel and clothes lift inflation – business live

Graeme Wearden

from on 2021-04-21 17:13 (#5GVVC)

Rolling coverage of the latest economic and financial news, as rising fuel and clothing costs push up the consumer prices index

House price inflation hits six-year high...
..although prices were flat month-on-month
House price sales highest since 2005
BoE governor: We need more diversity

Earlier:

Introduction: Consumer price index rises to 0.7% in March
Analysts: Inflation will keep rising as economy reopens
Asia-Pacific markets drop but FTSE 100 higher after Tuesday tumble

6.20pm BST

Finally, here are our latest stories on the race to buy a property....

6.16pm BST

6.13pm BST

5.12pm BST

European investors have put worries about Covid-19 variants behind them, with stocks ending the day higher.

The pan-European Stoxx 600 has closed 0.7% higher at 436.92 points, back towards last week's record highs, with gains in Paris, Frankfurt, London, Madrid and Milan.

LME update:#Aluminium 2368 +2.54%#Copper 9447 +1.73%#Nickel 16197 +1.48%#Lead 2034 +0.35%#Zinc 2816 +0.34%#Metals #Commodities

After the big declines seen yesterday, European markets have recovered some of their poise today, with the travel and leisure sector looking to find a bit of a base after recent declines, while health care stocks have outperformed, due to a positive read across from US medical devices company Intuitive Surgical, which has sent Smith and Nephew shares to two-month highs.

Airlines were big fallers yesterday with long haul carriers getting hit the hardest, over concerns that extended shutdowns in Asia markets could mean delays to the speedy resumption of long-haul travel. These concerns were borne out after IATA said that they were revising up their estimates for airline industry losses for 2021 to $48bn, from $38bn, presumably on the basis of delays to the resumption of international travel.

#UPDATE #Airlines are forecast to lose $47.7 billion (39.7 billion euros) in 2021, worse than previously forecast, global industry group the #IATA said Wednesday as the sector struggles to recover from the coronavirus pandemic https://t.co/nrZ2nZCPtU pic.twitter.com/lnRZ1gXMd3

4.22pm BST

Global airlines body IATA have lowered their global traffic forecasts for this year, as the pandemic and government restrictions continue to hit the sector.

In its latest industry outlook, the International Air Transport Association warns that travel restrictions, including quarantines, have killed demand".

#BREAKING Airlines face $47.7 billion loss in 2021, worse than earlier forecast: IATA pic.twitter.com/50oTvf3YnY

Latest @IATA outlook points to the start of industry recovery in the latter part of 2021. In the face of the ongoing crisis, these are the immediate priorities

See more https://t.co/C35fRQpwKO pic.twitter.com/Bo5CuhYG7D

This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases.

There is optimism in domestic markets where aviation's hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.

4.01pm BST

A sustainability rating agency has downgraded JP Morgan Chase after the US bank was revealed to be funding the failed European Super League breakaway attempt.

Standard Ethics, which grades corporations on their sustainability and is modeled on credit-ratings agencies, criticised the clubs as well as the bank.

Standard Ethics judges both the orientations shown by the football clubs involved in the project and those of the US bank to be contrary to sustainability best practices, which are defined by the agency according to UN, OECD and European Union guidelines, and take into account the interests of the stakeholders,"

3.43pm BST

The UK stock market is also pushing higher in late trading.

The FTSE 100 is now up almost 50 points at 6909, led by medical devices maker Smith & Nephew (3.4%).

The move higher comes despite one of the market's big fears - inflation - ticking up in the UK. It probably helps that the CPI measure came in short of expectations and it is also worth remembering that a modest climb in prices is a sign of the economy getting back on its feet.

The likely trajectory of inflation in the longer term means this issue is not going to go away and will remain something investors need to consider even if a short-term spike linked to pent-up demand in lockdown diminishes.

3.20pm BST

Wall Street is shaking off some of its Covid-19 worries, with stocks a little higher after yesterday's declines.

Cruise operators, who were among the big fallers on Tuesday, are bouncing back - with Norwegian Cruise Line jumping 7%, and Carnival and Royal Caribbean up 3%.

2.49pm BST

Over in New York, shares in Netflix have fallen sharply after the streaming services reported a sharp slowdown in subscriber growth last night.

Netflix stock is down 7% in early trading, at $511 after only adding four million new subscribers in the first quarter of 2021.

2.33pm BST

Bloomberg are reporting that Greensill Bank AG's German offices and the homes of board members have been raided by prosecutors in the city of Bremen, investigating accounting irregularities linked to the demise of the lender.

Here's the story:

Searches in the bank's offices started last week and are continuing, said Frank Passade, a spokesman for prosecutors. Investigators on Tuesday also raided the homes of some of the five suspects in the probe.

The raid continues as long as we say it continues," Passade said. This gives us the opportunity to get into the bank's offices whenever we need it."

Bloomberg scoop: Greensill Bank's German offices and the homes of board members were raided by prosecutors investigating accounting irregularities linked to the demise of the lender https://t.co/ZJiZn5NfCc via @business

2.07pm BST

Over in the US, demand for home loans jumped last week.

Weekly mortgage demand rose by 8.6% week-on-week, the Mortgage Bankers Association reports. This followed a drop in mortgage interest rates, as bond prices have eased back from their recent spike.

MBA expects the purchase market to remain strong, with the recovering job market and supportive demographics fueling housing demand in the months ahead

The average loan size for purchase applications increased after a few weeks of declines, as fewer homes available for sale make for a competitive buying market that is accelerating home-price growth."

Weekly mortgage demand jumps nearly 9% after interest rates fall to two-month low https://t.co/eHMWQpaKXK

1.32pm BST

As well as the gym (or perhaps instead of...), people will soon be able to visit more UK pubs.

JD Wetherspoon is opening another 44 pubs in England, plus 60 sites in Scotland and 32 pubs in Wales on 26 April, followed by three venues in Northern Ireland on 30 April.

The 44 English pubs scheduled to reopen on that date are mostly venues with smaller outdoor areas, in some cases patios that are able to seat only between 20 and 30 customers.

The pubs to open on 26 April are in London, as well as in Guildford, Ilkeston, Lincoln, Morecambe, Camborne, Driffield, Nottingham and Reading, adding to the 394 venues that reopened on 12 April when outdoor hospitality was permitted.

1.17pm BST

Yesterday's UK unemployment report showed the impact of the pandemic on younger workers.

Those below the age of 35 accounted for almost 80% of jobs lost in the past year. And young people are struggling to get onto the labour market, as employers cut back on recruitment schemes and work experience placements.

12.53pm BST

The number of homes sold in the UK hit a record high in March as buyers and sellers attempted to complete deals, and take advantage of the stamp duty holiday.

An estimated 180,690 transactions were recorded during the month, according to official figures from HMRC.

The property market remains in a parallel universe at odds with the wider reality everyone has been living.

It's been a gloom-defying 12 months, given that last March, when the first lockdown arrived, the market seized up, mortgage products were withdrawn and everyone held their breath."

12.23pm BST

Bank of England governor Andrew Bailey has weighed in on the issue of lobbying which is gripping UK politics and business, with a warning to be rigorous' about speaking to a diverse range of people when considering an issue.

Bailey was speaking this morning at an event to increase the diversity of the Bank's contacts within the financial sector, to improve its market intelligence and analysis operations.

As a public institution, we need to represent the diversity of the country in what we look like, who we talk to and the impact of our decisions.

Improved cognitive diversity helps make for better decision making. The lack of such diversity has been highlighted as one important factor in the bank and regulatory failures of 2008.

There is a very important further issue in all of this, which is sadly highly topical, namely to ask what is the antidote to the problem of lobbying? The answer is not to speak to no-one. That is not likely to lead to good decision making. The answer is to be rigorous about speaking to a diverse range of people to get their views.

Andrew Bailey will be giving the keynote speech at the @bankofengland virtual event Diversity in Market Intelligence - Launching our Meeting Varied People Initiative' at 11:30. His speech will be available here
https://t.co/MLhyNCc3hB

11.48am BST

Fitness fans took part in more than 1m workouts in the first week after reopening in England, according to the UK's largest gym chain, PureGym, my colleague Joanna Partridge explains.

Reporting a 92% crash in annual profits after Covid lockdown restrictions forced the closure of its gyms for more than a third of 2020, the group said customers were keen to get back on their exercise bikes, with footfall rebounding to a level similar to the equivalent week in 2019.

11.31am BST

We also have new data on the cost of renting a home, which show a small annual slowdown last month - particularly in London.

The ONS says:

Private rental prices paid by tenants in the UK rose by 1.3% in the 12 months to March 2021.

This was down from 1.4% in February 2021 https://t.co/bWDNWDOQhL pic.twitter.com/up0nBB0mvk

Rental price growth looks a lot more muted, and fell compared to last month in the capital, as well as the UK overall. pic.twitter.com/7rRa8qWduV

This could reflect the fact that private renters have suffered the hardest hits to income over the Covid period... pic.twitter.com/xGwfIF1g74

11.13am BST

Although house prices were sharply up year-on-year, they were flat on a month-on-month basis in February.

[although they were 0.5% higher month-on-month on a seasonally adjusted basis].

Following the Chancellor's introduction of more supportive measures in the Budget, including the mortgage guarantee scheme and extension of the Stamp Duty threshold increase, the EY ITEM Club now expects the housing market to show vigour in the near term and a modest firming of prices. The market will also likely be helped by the extension of the furlough scheme to the end of September and the fact that unemployment is not likely to rise as much as expected at the outset of the pandemic.

However, the EY ITEM Club is doubtful that this will be sustained for long as the strengthening of the housing market has been outsized relative to economic fundamentals.

10.27am BST

Today's house price report underlines just how hard it is to get onto the housing ladder.

Yesterday, Nationwide said it would lend more to first-time buyers, at up to 5.5 times their earnings.

10.16am BST

Andrew Montlake, managing director of the independent mortgage broker, Coreco, says Rishi Sunak's decision to freeze stamp duty last year has driven house prices up.

The new 95% mortgage guarantee scheme which begain this week will provide more demand, he adds:

This latest data is yet more evidence of how the Stamp Duty holiday has turbocharged the property market.

Even when the Stamp Duty holiday finally comes to an end, we expect the mortgage guarantee scheme to continue to support demand among first-time buyers, which will ripple up through the market and maintain a certain level of transactions.

Structural forces will also support transaction levels in the short to medium-term, as the pandemic has triggered a deep rethink among homeowners about what they want from a property.

The rules of the game have changed fundamentally and more people are finding themselves in properties that no longer suit their work lives.

10.09am BST

Across England, the North West has seen the highest annual growth in house prices - up 11.9% in the last year, while London saw the lowest, at 4.6%.

That fits with the pandemic trend of some families looking to move away from the capital to a (probably larger) house, and working from home rather than commuting as much.

9.46am BST

UK house prices have risen at their fastest pace in over six years, new figures show.

The Office for National Statistics reports that UK average house prices increased by 8.6% in February, compared to a year ago.

9.36am BST

Just Eat are the top FTSE 100 faller this morning, down 4.5%, after the Financial Times reported it faces a new challenge from Uber in Germany.

Here's the story:

Uber is attempting to break what it called Just Eat Takeaway.com's monopolistic" stranglehold on the German food delivery market, in the biggest test yet for the Silicon Valley company's use of employed couriers instead of gig workers for meal conveyance.

Uber Eats will launch in Germany for the first time over the next few weeks, starting in Berlin, in its biggest entry to a new country since 2018.

9.13am BST

UK manufacturers put up their prices last month, in a sign that inflationary pressures are rising.

The ONS reports that prices at the factory gate rose by 1.9% in the year to March, the biggest rise in nearly two years.

UK Mar Input PPI +1.3% on Month; +5.9% On Year

Whoops #inflation

Supply chain price pressures are increasing - rate of output inflation for goods leaving the factory gate up to 1.9% on the year to March 2021 (up from 0.9% in January).

Cost of raw materials prices rose 5.9% on the year to March, up from 3.3% in February. pic.twitter.com/2t2PYH5GGG

8.57am BST

TUC General Secretary Frances O'Grady says:

With inflation well below target, the Chancellor must do more to stimulate the economy and speed up recovery. He should start by boosting pay for the key workers who kept us going through the pandemic.

If workers get more spending power, our high streets and businesses will get a boost too. This will drive a faster recovery, supporting business growth and job creation."

8.52am BST

At 0.7% last month, the UK inflation rate is still some way below the Bank of England's 2% target.

ING Developed Markets Economist James Smith predicts CPI will rise over 2% this year:

UK inflation bounced back to 0.7% in March, after a series of quirks caused an outsized slowdown in headline CPI to 0.4% in February. Clothing prices were one such drag, recording a more than 6% fall in prices between December and February.

Unsurprisingly the effect of the latest lockdown meant many clothing retailers were forced to prolong their usual sales period, though with schools having returned in March and more activities reopening, fortunes are likely to be improving gradually. Indeed the price of garments rebounded by 1.6% in March.

Analysts getting pretty excited by today's UK inflation numbers for March - talk of "spike" and "jump"

Not sure that's warranted from looking at the y/y CPI or core CPI data... pic.twitter.com/rlvAKZfM5X

...no doubt arithmetic base effects will push the CPI rate up higher in the coming months, perhaps event to 2% - but that reflects weakness of prices in the pandemic, not embedded inflationary expectations or wage-push spiral or any of the other things to really worry about...

8.33am BST

European markets have also opened higher after their worst selloff of 2021 yesterday.

The pan-European Stoxx 600 is up 0.5% in early trading, pushing it back towards last week's record highs.

Tech stocks were the top gainers, up almost 2%, with semiconductor equipment maker ASML jumping 5.4% after it raised its full-year sales forecast, citing strong demand amid a global computer chip shortage.

Smaller rival ASM International rose 4.2% on forecasting a rise in second-quarter orders.

8.22am BST

In the City, the FTSE 100 index has opened higher, clawing back some of yesterday's losses.

The blue-chip index is up 37 points or 0.5% at 6897 points (having fallen 140 points, or 2%, on Tuesday).

8.11am BST

Economic research group NIESR has calculated that underlying inflation rose last month:

Annual headline #inflation increased to 0.7% in March, up from 0.4% recorded in February, due largely to #price increases in the #transport category. Base effects and the gradual easing of the winter #lockdown could introduce some #volatility over the short term, as ...

1/3

...items in the non-essential #retail, restaurant and #hotels categories are re-introduced in the calculation of consumer #inflation. Our measure of underlying inflation, which excludes extreme price movements, increased to 0.6% in March from 0.2% in February

2/3

8.06am BST

Paul Craig, portfolio manager at Quilter Investors, also predicts a rise in prices this year as the economy reopens:

The UK has reached a turning point in its economic reaction to the pandemic where price growth is now on an upward trajectory, and should remain so for some time to come. Year-on-year consumer price growth slowed to 0.4% in February from 0.7% in January, primarily due to falling prices in clothing and footwear.

Now we have year-on-year CPI inflation ticking back up to 0.7% in the 12 months to March 2021, and year-on-year CPIH up to 1% due to rising costs of transport, particularly motor fuels, and clothing. Food and non-alcoholic beverages continue to drag inflation down.

7.58am BST

Paul Dales, Chief UK Economist at Capital Economics, predicts inflation will keep rising, especially now that clothes shops have reopened.

The rebound in CPI inflation from 0.4% in February to 0.7% in March is the start of a rise that we think will take inflation to around 1.5% in the next few months and above 2.0% by December.

But as we doubt inflation will stick above 2.0% until late in 2023, the Bank of England is unlikely to hike interest rates for a few years yet.

7.54am BST

This chart illustrates pretty clearly why inflation rose last month:

7.46am BST

Deputy national statistician Jonathan Athow points out that food prices have fallen back, with the prices of some staples lower than a year ago (at the start of the pandemic).

.@jathers_ONS continued: (2/2) pic.twitter.com/YnyxQinYVj

Commenting on today's figures, Deputy National Statistician for Economic Statistics @jathers_ONS said: (1/2) pic.twitter.com/WOYmLiF1yY

7.35am BST

On a monthly basis, the UK consumer prices index (CPI) rose by 0.3% in March.

That was mainly due to the cost of motor fuels and clothing going up, helping to push the annual inflation rate to 0.7%.

7.19am BST

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

The UK's inflation rate has risen, pushed up by rising fuel and clothing costs ahead of the easing of the Covid-19 lockdown.

Between March 2020 and February 2021, motor fuels made a downward contribution to the CPIH 12-month rate. However, the contribution has turned positive in March 2021 reflecting a 12-month rate for motor fuels of 3.5%, the first positive rate since February 2020.

Petrol prices stood at 123.7 pence per litre in March 2021, compared with 119.4 pence per litre in March 2020 and a recent low of 106.2 pence per litre in May 2020.

The rise this year has been influenced by a fall in the amount of discounting between February and March, albeit the incidence of discounting is still above normal levels for the time of year.

The upward contribution came principally from a wide range of women's clothing.

@ONS data shows #UK CPI #inflation rate rose to 0.7% in March 2021 (from 0.4% in February)

First upward contribution from fuel prices since Feb-2020 helped drive the increase in the 12-month rate in March

UK CPI #inflation rose by 0.3% m/m, amid rising fuel & clothing prices. pic.twitter.com/Ln8rg7il7N

A worsening health crisis in India pushes out the return of pre-covid travel even further in the Asia-Pacific region.

It highlights the uneven pace of economic recovery in pockets of emerging markets.

#Wednesday #markets under pressure as global #covid cases rise #Volatility at 3 week high. Watching #GBP ahead of UK inflation data. #USDJPY now 6wk lows. #NFLX down 9% as subscribers fall. #Gold up. Join @IGcom at 07:30amUK for #EarlyMorningCall - https://t.co/t7xbaLPqC7 pic.twitter.com/3B1YJsFJkj

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