tony's blog

Thursday, August 11, 2011

Life's a Riot

So we have more gloomy economic data to contend with on top of the riots and turmoil in the markets? Manufacturing data fell by 0.4% in June and Britain’s deficit in goods trade with the rest of the world widened from £8.5bn to £8.9bn in June. Not looking good and I guess it’s hardly surprising that we are starting to hear more of the words ‘double dip’ from many analysts. Oh to be in England…! Then again the rest of Europe and the US don’t look so hot either at the moment either.

With this backdrop it is hardly surprising that Mervyn King and his friends at the Bank of England have revised UK growth forecast for the year from an always optimistic 1.8% to a not so healthy 1.4%. I predicted this would happen in June and  sadly I think he may have to revise this forecast down again in the next couple of months; things don’t look to be getting better anytime soon and not only do we have to look at economic data at home but what’s happening overseas also. Surely it’s only time before the Office of Budget and Responsibility will follow suit very soon forecast down from its buoyant forecast of 1.7% for the year. 

For me, I think 1.1% for the year is more likely a figure. And that’s me being optimistic!

Tuesday, August 2, 2011

The Black Hole

Santander UK recently announced a 21% drop in gross mortgage lending for the first six months of 2011 compared to the same period of 2010 and similarly today Barclays reported a drop of 10% for the same period. Santander said it reflected the weaker pipeline from the last quarter of 2010, representing reduced consumer demand.

I’m led to believe this scenario is not uncommon and other lenders are facing a similar drop in gross mortgage lending for the first six months of the year - and beyond.

Surely therefore this makes the CML’s revised market forecast for 2011 predicting an increase in gross lending to £140bn from £135bn implausible? This seems to go against other data which suggests general stagnation of the market due to severe rationing of funds by lenders and lack of demand from would be buyers prompted by fears of a downturn in the economy including higher unemployment and weaker consumer confidence.

I appreciate that it is sometimes good to talk the market up. However it is very difficult to see exactly where this extra lending is coming from. Methinks another revision is on the horizon.