Tentative hopes that the British economy is beginning to emerge from recession have continued to rise as new indicators suggest the possibility of a softer-than-expected landing for the housing market.
Mortgage approvals for house purchase rose by 16% during April, according to the Council of Mortgage Lenders. Even so, the 35,600 loans granted were 28% down on April last year. And reports from Halifax and Nationwide of house price increases in May, added to an increase in new buyer enquiries at house agents, suggest that the housing market is no longer in freefall.
Evidence of the depth of the recession which has clobbered housebuilding, and the construction industry overall, comes in new estimates of output in the first quarter of the year. Government officials say that output of new housing work was down 9%, and was 29% lower than in the first quarter of 2008. Housing repair and maintenance fell 12% on the quarter and by 8% annually. Total construction output dropped by 9% during the first quarter of 2009 and was 17% lower than in the first quarter of 2008.
Decline slowing
The latest Purchasing Managers’ Index for construction shows that although the sector continued to contract during May, there were signs that the decline has slowed, “with murmurs of a possible upturn in housebuilding activity”, noted by CIPS director Roy Ayliffe.
On new construction orders, official figures show that in the three months to April the total was down by 9%, and was 38% lower than in the corresponding period in 2008. In the latest three-month period orders for private-sector housing fell 2%, and they dropped by 42% annually.
New orders for commercial projects such as shops, warehouses and offices in the three months to April fell 18% compared with the previous three months and were 58% lower than in the same period a year ago. Orders for industrial buildings slipped 4% between the two latest three-month periods and fell 48% compared with a year earlier.
The more volatile monthly figures reveal that the intake by contractors of new orders for private housing rose by 4% in April, while commercial and industrial orders rose by 48% and 31% respectively. Total new construction orders were up 17%.
Manufacturing output
Manufacturing output rose in total by 0.2% in April, according to government data, but is nearly 13% lower than in April 2008. Production of furniture grew by 1.3% on the month; wood and wood products overall were up 0.1% but were 23% lower than 12 months before.
From the high street, Homebase reports that sales of gardening and outdoor products were up 3.8% annually in the 13 weeks to the end of May, but its owner Home Retail Group, which also includes Argos, says that furniture and homewares markets remain challenging.
This echoes the British Retail Consortium, which reports that sales of big-ticket furniture and large electrical goods remained “difficult” in May. UK retail sales overall fell in value by 0.8% from May 2008 on a like-for-like basis, the BRC says, and rose by only 0.8% on a total basis. Certainly there are still clouds on the horizon. A near doubling of the price of oil this year prompted chancellor Alistair Darling to warn that economic recovery could be held back by the rising cost. Further, consumer spending is forecast to remain muted due to slow income growth and fears of unemployment, and some analysts fear that the positive indicators merely reflect an upward blip ahead of a further slowdown in what may prove to be a double-dip recession.
Nonetheless, independent forecasters, including the respected National Institute for Economic and Social Research, say the economy may have started to expand again in April and May.
