The UK reported a veritable blizzard of bad news today—no wonder the Pound was is falling off the cliff.

The UK reported a veritable blizzard of bad news today—no wonder the Pound was is falling off the cliff.

The Royal Institution of Chartered Surveyors said the number of agents and surveyors reporting lower prices exceeded those reporting gains by 83.9% in July, bringing the housing market to a “virtual standstill.” All 11 regions showed negative price balances on the month. This is consistent with the reports from mortgage lenders. Separately, the government reported June house prices up 0.6% y/y after 0.3% in May.

Surely buying activity rises when prices bottom, but they seem to be rising still (although the RICS report is for July and the government report on house prices is for June). Hmm.

The British Retail Consortium reports July like-for-like retail sales down 0.9% after a June drop of 0.4%. Total sales rose 1.7% y/y after 2.1% y/y in June. Market News says “UK consumer spending is fading.”

July consumer price inflation jumped to 4.4% from 3.8% in June, the highest since April 1992 and over forecasts of 4.1%. The FT reports that CPI inflation has now climbed almost 2% in the last four months, “and is set to spike higher as big increases in utility tariffs take effect.” An analyst said it’s almost certain inflation will rise above 5% in the next few months.

We get the BoE policy committee Inflation Report tomorrow.

Clearly the scope for a interest rate cut to goose business is getting tiny, if it still exists at all. Having said that, the rise in inflation is due to energy prices and food, not things that monetary policy can affect. Food and drink has risen 12.3% y/y, the fastest in 10 years. Still, core inflation is up to 1.9% from 1.6%, so rising prices are more broad-based. To make life difficult, the retail price index (includes mortgages) rose to 5% (from 4.6%), and the RPIX index (excludes mortgage interest payments) rose to 5.3%.

All in All the Pound is in trouble

Bye For Now

Barbara Rockefeller

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