UK Halifax House Price Inflation Tops Expectations

UK house price inflation accelerated at a more than expected rate in April, figures from the Lloyds Bank subsidiary Halifax and IHS Markit showed on Wednesday.

The house price index surged 5.0 percent year-on-year in April, following a 2.6 percent increase in March. Economists had expected a 4.5 percent rise.

Compared to the previous month, house prices rose 1.1 percent in April, after a 1.3 percent decline in March. Economists had expected prices to rise 0.1 percent.

In the February to April period, house price climbed 4.2 percent from the November to January period.

The average house price rose to GBP 236,619 from GBP 233,995 in March.

“The index has seen a weaker pace of growth over the last three years, which is consistent with the easing of transactions volumes and housing market activity reflected in RICS, Bank of England and HMRC figures,” Russell Galley, Managing Director, Halifax, said.

“Looking further back, this April also marks 10 years since the lowest point of the Halifax house price index following the financial crash in 2008. Over the past decade annual house price growth has seen the average price increase by GBP 81,956, or an average rise of 4.3 percent each year.”

UK Service Sector Shrinks For First Time Since July 2016

UK service sector shrunk for the first time in over two-and-a-half years in March as domestic political uncertainty damped demand amid labor shortages, survey data from IHS Markit showed on Wednesday.

The CIPS/IHS Markit services purchasing managers’ index, or PMI fell to 48.9 in March from 51.3 in February. Economists had expected a score of 51.

A reading below 50 suggests contraction in the sector. The services PMI reading fell below 50 for the first time since July 2016.

Aside from the brief dip seen after the EU referendum, the latest reading was the joint weakest seen over the past decade and equaled the previous low point recorded in December 2012, IHS Markit said.

The composite PMI dropped to 50 in March from 51.4 in February. Economists were looking for a score of 51.2.

Silver lining for Ireland from Brexit, S&P argues

Ireland is more than four times exposed to the effects of Brexit than the median of 21 countries ranked by rating agency Standard & Poor’s, but there is a silver lining amid the economic clouds.

Most economic forecasters say there will be a big hit to the economy this year with growth slowing dramatically to the region of 1pc-1.5pc from 6.7pc in 2018, and the ratings agency sees a “sizeable shock” due to close economic links.

However, S&P highlighted in a report that some of the upsides of Brexit have already started to emerge as the process has unfolded.

These upside may accelerate if the UK does leave the European Union, especially if there is a no-deal Brexit with no transition period.

Around 4,000 jobs have been created by businesses relocating here, often in the high-paying finance sector from firms such as Barclays which has established its European HQ in Dublin.

That trend could accelerate and while the economic shock from a no-deal Brexit will be severe, the departure of the only other English-speaking country from the European Union will likely see Ireland grab yet more investment.

“We would expect that Ireland’s highly flexible economy would reorient trade toward even larger trading partners, such as the remaining EU countries and the US,” S&P said.

“We also think that Ireland is well placed to attract some of the foreign direct investment displaced from a post-Brexit UK, should UK-based financial subsidiaries and branches lose their coveted EU passporting rights, which currently enable them to sell financial services in the EU market,” the ratings agency added.

Ireland has already weaned itself off export dependence on the UK.

In 1973 when the State joined what was then the EEC, 55pc of exports went to the UK – now that figure is less than 10pc. According to research from economists at the National Treasury Management Agency, the economy is now far more geared to the US cycle than any other.

The potential for higher levels of investment was highlighted earlier this week in a report from the Economic and Social Research Institute (ESRI).ADVERTISEMENT

The think tank said Ireland would become more attractive to multinational companies once the UK loses tariff-free access to the EU market.

In aggregate terms, the gain from foreign direct investment could amount to around €26bn, which would represent an increase of 3.3pc over the current stock of Irish FDI, it said.

Gains from this would be concentrated in the computer, electronic and optical products industries and would boost exports by 2.8pc over 10 years, the ESRI said in its report.