Summary
- The second estimates of GDP from the ONS show unrevised growth of 0.3% over the second quarter 2003, with annual growth rate remaining at 1.8%.
- Although retail sales fell in July, the overall trend remains very strong. But there was a surprise fall in consumer confidence in August. Which may impact on sales going forward.
- Both industrial and manufacturing production increased in June. However much of the rise in production is weather related and does not signify a turn in the fortunes of the industrial sector.
- The labour market remains very strong with unemployment falling again and employment continued to rise.
- RPIX inflation rose in July to 2.9%, up from 2.8% in June. Most of this rise appears due to weather-related factors and this temporary pick-up is unlikely to have any policy implications.
- The MPC voted unanimously in favour of keeping rates at 3.5% with the minutes showing an equal weight given to increasing and cutting rates.
- According to the Nationwide, house prices increased by 1.1% in August. Although the annual rate of growth has eased to 16.6%, it has not moderated as quickly as expected and Nationwide have revised up its end of year forecast to 13%.
- The most recent data from Halifax also show annual house price growth easing. House price growth fell from 18.8% in June to 18.1% in July.
- It was yet another record month for lending in July. Gross lending totalling £25.1 billion and net lending reached £9.5bn. At nearly £30bn in July approvals remain incredibly strong.
- Remortgaging also remains strong reaching £10.7 bn in July.
- Fixed rates once again increased in popularity accounting for 55% of lending in July. The average new fixed rate was 4.12%, against an average 3.96% variable rate.
Commentary
Economic developments
Q2 growth unrevised at 0.3%
The second estimates of GDP from the ONS show unrevised growth of 0.3% over the second quarter 2003. This means the annual growth rate remains at 1.8%. Growth is still completely dependent on consumer and government spending. Consumer spending expanded by 1.3% during the second quarter, the fastest pace of growth since the third quarter of 2001. This questions the Bank of England’s recent assertion that consumer spending is slowing. In addition, government spending grew by 1.1%. However, despite the fall in sterling, trade remain weak, with exports falling 2.9% over the past three months.
