ECONOMIC OUTLOOK
NON-FOOD retail sales growth sank to its lowest level in five years this Christmas trading period, according to the British Retail Consortium (BRC).
Inflation rose to its highest in almost six years in November, hitting 3.1% – and with wages failing to keep pace, household incomes have been squeezed.
It said that on Tuesday that spending rose by 1.1% in the three months to the end of December, compared to an average rate of 1.7% throughout the year.
However, while food sales grew by a healthy 4.2%, non-food sales fell by 1.4% in the fourth quarter compared to a year earlier.
House price growth slowed to 2.7% last year, with home values held back by the squeeze on wage growth and continuing economic uncertainty, according to Halifax.
The average UK house price ended the year just above £225,000.
The research follows similar figures from rival lender Nationwide, which put UK house price growth in 2017 at 2.6%.
Halifax expects price growth of between 0% and 3% this year.
“Nationally, house prices in 2018 are likely to be supported by the ongoing shortage of properties for sale, low levels of house-building, high employment and a continuation of low interest rates making mortgage servicing affordable in relative terms,” said Russell Galley, the managing director of Halifax Community Bank.
According to Sam Tombs at Pantheon Macroeconomics: “The data suggest the recent jump in mortgage rates has poured cold water on a market that already was flagging.
“The recent reforms to stamp duty for first-time buyers and further reductions in the number of existing homes coming on to the market, however, should ensure that prices stabilise, rather than fall outright, in 2018.”
The UK construction sector had a weaker-than-expected December, while expectations for 2018 are the worst in four years, according to an industry survey.
The Markit/CIPS construction purchasing managers’ index (PMI) fell to 52.2 in December from 53.1 in November.
Tim Moore, associate director at Markit, said: “Construction firms indicated that longer-term business confidence is still relatively subdued, largely reflecting concerns about the domestic economic outlook.”
UK manufacturing also slowed in December, with Markit’s manufacturing PMI declining to 56.3 from 58.2 in November.
Meanwhile, the UK services PMI showed slightly higher than expected activity, though new orders were disappointing – falling to their lowest level in 16 months. The IHS Markit/CIPS index was 54.2, up from 53.8 in November.
Combining the three sector PMIs gave a composite reading of 54.9 for December, slightly shy of expectations.
This suggests the UK economy grew at a quarterly rate of 0.4% to 0.5% in the fourth quarter, which would make annual growth in 2017 around 1.8%.
Shop prices fell 0.6% year on year in December as retailers offered discounts on non-food products, said the British Retail Consortium.
The BRC-Nielsen shop price index registered its deepest rate of shop price deflation since March. But while non-food prices dropped 2.1%, food prices rose 1.8%.
Mike Watkins, Nielsen’s head of retailer and business insight, said: “With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins.
“Whilst food prices have edged up a little due to supply chain increases in fresh and seasonal foods, pricing across supermarkets will remain competitive as we start 2018 with consumers still coping with higher household bills.”
UK productivity has grown at its fastest rate for six years, according to the latest quarterly figures from the Office for National Statistics (ONS). Output per hour by UK workers increased by 0.9% in the third quarter of 2017.
However, the figures also showed that productivity growth over the past decade was the lowest for nearly 200 years.
Britain has suffered a “lost decade” of productivity growth since the financial crisis as a slower-thanexpected recovery and low unemployment have held down increases in output per worker.
About 2.5m new cars were sold in the UK in 2017, 5.7% fewer than in the previous year, according to the Society of Motor Manufacturers and Traders.
The SMMT said that 2017 has “undoubtedly been a very volatile year”, adding: “Lacklustre economic growth means that we expect a further weakening in the market for 2018. The upside for consumers, however, is some very, very competitive deals.”