UK inflation reaches five year low as UK house prices reach five year high

Mar 25 • Mind The Gap • 1777 Views • Comments Off on UK inflation reaches five year low as UK house prices reach five year high

shutterstock_129797951From the Conference Board overnight we received the latest print regarding China’s economic performance with the LEI showing a reading of 282.4, up by 0.9 on the month.

From the UK the latest inflation figures are in showing that the UK’s CPI inflation rate has fallen to its lowest level since 2009 at 1.7% year on year. Far too early for deflation worries to occur, however, in order to maintain a healthy economy the BoE’s MPC will no doubt keep a hawkish eye laser focused on the inflation data throughout the remainder of 2014.

From the UK we also received the latest house price data showing that house prices have increased by 6.8% in January 2014. Stripping out London and the prices have only increased moderately throughout the remainder of the UK, however, with estate agents now reporting increased inventory and the UK govt. help to buy scheme attracting wider participation, the chance of house prices increasing further in 2014 looks like a sure bet.

Germany’s business confidence has taken a knock due to the on-going problems in the Ukraine threatening many German businesses. It’s one thing to threaten sanctions and putting thumbscrews on a member of the G8, but the real and present fear of a ‘tit for tat’ escalation is severely affecting the potential for business in Germany, both export and import.

UK House Price Index, January 2014

UK house prices increased by 6.8% in January 2014 compared with a year earlier, up from 5.5% in December 2013. House prices grew by 7.1% in England, 6.9% in Wales, 1.4% in Scotland and 2.7% in Northern Ireland. House price growth is increasing strongly across some parts of the UK, with prices in London again showing the highest growth. Annual house price increases in England were driven by rises in London (13.2%), the South East (7.1%) and the West Midlands (5.3%). Excluding London and the South East, UK house prices increased by 3.8% in the 12 months to January 2014. On a seasonally adjusted basis, average house prices increased.

UK Consumer Price Inflation, February 2014

The Consumer Prices Index (CPI) grew by 1.7% in the year to February 2014, down from 1.9% in January. The largest contribution to the fall in the rate came from transport (principally motor fuels) with other smaller downward effects from the housing & household services and clothing & footwear sectors. These were partially offset by upward contributions from furniture & household goods and recreation & culture. CPIH grew by 1.6% in the year to February 2014, down from 1.8% in January. RPIJ grew by 2.0%, down from 2.1% in January.

Conference Board LEI increased in February

The Conference Board Leading Economic Index® (LEI) for China increased 0.9 percent in February. The index stands at 282.4 (2004 = 100), following a 0.3 percent increase in January and a 0.4 percent increase in December. Four of the six components contributed positively to the index in February.

The China Leading Economic Index accelerated in February on the back of strong bank lending. At the same time, we see that despite high credit creation, the slowdown in current economic activity deepened in the first two months of the year.

says Andrew Polk, resident economist at The Conference Board China Center in Beijing.

German Business Confidence Falls as Russia Sanctions Pose Risks

German business confidence fell for the first time in five months as companies assess the risks to trade from escalating European Union sanctions against Russia. The Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 110.7 in March after reaching 111.3 the prior month, the highest level since July 2011. Economists predicted a decline to 110.9, according to the median of 44 estimates in a Bloomberg News survey. While the Bundesbank says German economic growth probably strengthened “substantially” in the first quarter, the outlook is threatened by rising tension with Russia and an economic slowdown … (full story)

Market snapshot at 10:00 am UK time

In the overnight-early morning trading sessions the ASX 200 closed down 0.21%, the CSI 300 down 0.10%, the Hang Seng down 0.52% and the Nikkei down 0.36%. Euro STOXX is up 1.03%, CAC up 1.13%, DAX up 1.08%, FTSE up 1.05%. The DJIA equity index future is up 0.16%, SPX up 0.16%, NASDAQ up 0.15%. NYMEX WTI oil is up 0.12% at $99.72 per barrel, with NYMEX nat gas up 0.51% at $4.30 per therm. COMEX gold is down $1313.60 per ounce, with silver at $20.26 down 1.26%.

Forex focus

The euro slipped 0.1 percent to $1.3831 early in London after climbing 0.3 percent yesterday, the biggest one-day advance since March 14th. It bought 141.42 yen, following a 0.3 percent gain to 141.49 in New York. The Aussie fell 0.1 percent to 91.26 U.S. cents and earlier rose to 91.58, a level unseen since Dec. 10th. The euro held gains versus most of its major counterparts before a report today that may show business confidence in Germany, the region’s biggest economy, held near a 2 1/2-year high.

The euro has risen by 0.1 percent in the past three months, according to Bloomberg Correlation Weighted Indexes that track 10 developed-nation currencies. The dollar lost 1.1 percent, while the yen climbed 1.2 percent. The Aussie advanced 1.4 percent. The kiwi was the best performer in the gauge, gaining 3.8 percent.

The pound was little changed at $1.6494 early London time. It reached $1.6460 yesterday, the least since Feb. 12th. The U.K. currency was at 83.89 pence per euro. It depreciated to 84 pence on March 19th, the weakest since Dec. 25th. The pound approached a six-week low versus the dollar before a report economists said will show inflation in the U.K. slowed to the least in more than four years last month.

Bonds briefing

The 10-year gilt yield was little changed at 2.68 percent. The price of the 2.25 percent bond due in September 2023 was at 96.45. Treasuries were little changed, with the benchmark 10-year yield at 2.73 percent early in London. The price of the 2.75 percent note due in February 2024 was 100 6/32. Yields were 0.43 percent for two-year notes and 3.57 percent for 30-year bonds. Treasury short-term notes were the cheapest in almost four years versus their global peers before the U.S. sells $32 billion of two-year debt today.
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