G D P To Double As Recovery Locks In

[angrypirate]

Is this really good for house prices falling? Surely it's bullish.

Its good news as it shows the BoE went over the top in cutting rates and printing money. They have "overshot" it which has let to growth being above target (target being 2%pa - annualised this result is 4.4%).

This means the BoE has no excuse not to increase interest rates to curb inflation.

The other arguement is that they can withdraw the money they have printed, but it is commonly accepted that the rates will be increase prior to this money being withdrawn from circulation.

The second interest rates go up, the number of forced sellers will shoot up faster than you can say "its the recovereh innit"

Edited July 23, 2010 by angrypirate

[Bloo Loo]

Its good news as it shows the BoE went over the top in cutting rates and printing money. They have "overshot" it which has let to growth being above target (target being 2%pa - annualised this result is 4.4%).

This means the BoE has no excuse to increase interest rates to curb inflation.

The other arguement is that they can withdraw the money they have printed, but it is commonly accepted that the rates will be increase prior to this money being withdrawn from circulation.

The second interest rates go up, the number of forced sellers will shoot up faster than you can say "its the recovereh innit"

think you missed a "not" in the bold sentence

[non frog]

The market may be reflecting that it is growth compared with a very low base. The debt is still the Elephant in the room and its growing by billions every day and there is no credible plan to reduce it---yet.

It will ALL stand and fall on the direction of house prices. They are the engine of grwoth that drives everything else: jobs, construction, banking, consumer goods....

This is just what we need to help boost our exports (not):

1 GBP =Inverse:

1.54040

I fear you are right in your analysis. The debt can be controlled if it is passed on to the next generation it is they who must repay it and they who will be priced out the housing market to ensure that consumer spending (mostly by the old) continues.

I have been amazed and impressed in equal measure by the ingenuity and skill shown by the G20 governments (Brown included) in continuing to hoodwink the masses (many here might see through Brown's attempts to prop up HPI but the majority do not). In fact I now think that this charade might continue for another year or so before the catastrophic and inevitable collapse that must surely follow.

Let's see if the government begins its inevitable U turn on housing benefit as it tries to hold up prices in the South East. Making people homeless then housing them in B&B is not going to save any money - the excuse is ready made (and true).

The next 6 months are going to be very interesting indeed.

[Guest_FaFa!_*]

1 GBP =Inverse:

1.5395

Now just made a new high for the day at 15414. You really love your insignificant market moves don't you? Or do you believe this is some sort of butterfly effect?

[MrFlibble]

It will ALL stand and fall on the direction of house prices. They are the engine of grwoth that drives everything else: jobs, construction, banking, consumer goods....

+1

We cannot simply replace ten plus years of housing boom fuelled growth with something else. We don't have the 'something else' for a start, especially since during the boom time we decimated most our real productive activities.

Sure we can print up some more growth, which seems to be Merv's strategy, but this is just an exercise in deckchair shuffling as the ship goes down.

With the housing market a long way from a bottom then I'm not very optimistic on a sustained recovery in the UK.

[angrypirate]

think you missed a "not" in the bold sentence

Thank you bloo

[seriousz]

"The construction data was based for the first time on a new monthly survey, rather than estimates which used to be used at this stage."

nothing sus about the figures then.

ONS "Hello builder, hows sales this quarter"

Builder "up about 10%, id say...can you persuade your mates in housing to restart the homebuy scheme...we have an awful lot of the worlds smallest flats to sell next quarter"

ONS "so if was said 6% up, youd be happy with that"

Builder "sure thing and dont forget those homebuy schemes....please"

The construction company I work for has certainly seen an explosion in work - some affordable housing, but mostly private housing, with all the developers opening sites all over the place. Apparently they've run down their stock and have nothing left to sell and so have started building again.

We're as busy as we've ever been, and are turning work away. My boss is convinced the boom times are back; I have a feeling we might have a cliff up ahead of us and we might get a repeat of the catastrophic drop in work we had in 2008. We're going to ask the bank for more money next week.

But for now at least we're booming...

[neil324]

Its good news as it shows the BoE went over the top in cutting rates and printing money. They have "overshot" it which has let to growth being above target (target being 2%pa - annualised this result is 4.4%).

This means the BoE has no excuse not to increase interest rates to curb inflation.

The other arguement is that they can withdraw the money they have printed, but it is commonly accepted that the rates will be increase prior to this money being withdrawn from circulation.

The second interest rates go up, the number of forced sellers will shoot up faster than you can say "its the recovereh innit"

How they can talk about QE after this, also rates 'should' be raised fairly soon now. All good for HPC.

[Guest_FaFa!_*]

Now just made a new high for the day at 15414. You really love your insignificant market moves don't you? Or do you believe this is some sort of butterfly effect?

High for the day now 15436, but it has sold off a little in the last 10 mins. I think it should test the 15440-50 level, beyond that 15500 would look likely, IMHO. A breach of 15500 would be a significant event. A breach below 15400 would probably lead to a reasonably sized sell off.

Just my opinion is all.

Edited July 23, 2010 by Shylock

[red]

Darling on Radio 5 now...

'GDP figures vindicate the approach we took...'

i.e. we threw the kitchen sink at the economy to get re-elected.

Let's see what the next quarter's figures are like...

Edited July 23, 2010 by red

[MrFlibble]

How they can talk about QE after this, also rates 'should' be raised fairly soon now. All good for HPC.

I'm sure the BoE will wheel out some rubbish about a weak recovery hence the need to support it with low rates and an extension of QE. Inflation doesn't seem to matter any more either.

Not seen Merv come out and weaken our currency for a long while - this is overdue IMO, even more so now.

[Realistbear]

Now just made a new high for the day at 15414. You really love your insignificant market moves don't you? Or do you believe this is some sort of butterfly effect?

Insignificant?

The 24 intraday low was 1.524. This is a 200bp move which is huge.

IMO, its volatility in the extreme sense of that word. The markets are turning on every piece of news as the headless chicken dashes around looking for some direction.

[Captain Cavey]

Sorry – it was Mrs Cavey. She went back to the UK for some retail therapy at the end of Q2, and the quantity of shoe purchases alone were enough to cause this blip.

[neil324]

I'm sure the BoE will wheel out some rubbish about a weak recovery hence the need to support it with low rates and an extension of QE. Inflation doesn't seem to matter any more either.

Not seen Merv come out and weaken our currency for a long while - this is overdue IMO, even more so now.

I'm 110% sure they will.

[Realistbear]

http://www.bbc.co.uk/news/business-10737352

The figure -

a preliminary estimate from the Office for National Statistics (ONS)

- was almost double the 0.6% growth rate expected by economists.

It was the fastest quarterly expansion since 2006, and marked a sharp pick-up in pace from the 0.3% growth of the first three months of the year.

To be revised, no doubt.

In the meantime FOREX is going wild on the news with Sterling soaring vs. the Euro, $ and other majors:

1 GBP =

1.54299

1.19210

FTSE no like:

FTSE 100 5297.39-0.31%

IR hike in the offing perhaps?

Edited July 23, 2010 by Realistbear

[bleakhouse]

It will ALL stand and fall on the direction of house prices. They are the engine of grwoth that drives everything else: jobs, construction, banking, consumer goods....

You capture it all in one line. For this reason I think UK interest rates will remain low for the now proverbial extended period of time. It doesn't cost the government anything, it helps the banks repair their balance sheets from the spread and it stimulates the economy. The risk of runaway inflation is low in a world of deleveraging and deflation. There will be enough brakes on the economy from the cuts.

With interest rates low it is now cheaper to buy than rent. I am a bear only in that I think house prices should be lower, if I was an STR I would be buying since the low interest on my cash pile wouldn't cover my rent. I think the arithmetic on to BTL gives a better return than many other investments, without capital gain/loss, I think the UK will survive.

The US on the other hand, is totally mucked up. I think could be worthwhile to revisit Peter Schiff's decoupling theories of a few years ago.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

In the three months to May more public money was spent on construction than in any quarter on record.

http://brickonomics.building.co.uk/2010/07/a-last-hurrah-for-construction-before-the-axe-falls/

Ho Ho Ho Ho Ho

[Bloo Loo]

The construction company I work for has certainly seen an explosion in work - some affordable housing, but mostly private housing, with all the developers opening sites all over the place. Apparently they've run down their stock and have nothing left to sell and so have started building again.

We're as busy as we've ever been, and are turning work away. My boss is convinced the boom times are back; I have a feeling we might have a cliff up ahead of us and we might get a repeat of the catastrophic drop in work we had in 2008. We're going to ask the bank for more money next week.

But for now at least we're booming...

nice anecdote.

just passed a site that last year boasted.."sorry all gone..youve missed out".

the site has a whole row of signs on new units (wont call them houses) in big bold AVAILABLE...not one SOLD.

plenty of by builder/surveyor customers still very slack....I suppose government bailouts go to the bigger developers.

[soldintime]

http://www.bbc.co.uk/news/business-10737352

The figure -

a preliminary estimate from the Office for National Statistics (ONS)

- was almost double the 0.6% growth rate expected by economists.

It was the fastest quarterly expansion since 2006, and marked a sharp pick-up in pace from the 0.3% growth of the first three months of the year.

To be revised, no doubt.

In the meantime FOREX is going wild on the news with Sterling soaring vs. the Euro, $ and other majors:

1 GBP =

1.54299

1.19210

FTSE no like:

FTSE 100 5297.39-0.31%

IR hike in the offing perhaps?

With the massive drop in GBP, massive stimulus plus QE, Cash for clunkers, plus mega bank bailout a 1.1% growth is expected. However if you compare all those amounts of money spent than the growth is pretty small. Plus all that debt will have to be repaid or worse written off. UK, Europe, US & Japan are getting into a corner where more credit can not be created. Deflation is still the logical outcome. What we are seeing now is some really wild swings in stock markets and currency markets on lagging indicators. Also the complete mis judging of the first credit crunch, no one saw it coming. Are we better off now than at 2008?

We are seeing the last stages of the bear trap. Even RB is wildly swinging in his opinions although I think most of his bullish ones are sarcastic.

[soldintime]

You capture it all in one line. For this reason I think UK interest rates will remain low for the now proverbial extended period of time. It doesn't cost the government anything, it helps the banks repair their balance sheets from the spread and it stimulates the economy. The risk of runaway inflation is low in a world of deleveraging and deflation. There will be enough brakes on the economy from the cuts.

With interest rates low it is now cheaper to buy than rent. I am a bear only in that I think house prices should be lower, if I was an STR I would be buying since the low interest on my cash pile wouldn't cover my rent. I think the arithmetic on to BTL gives a better return than many other investments, without capital gain/loss, I think the UK will survive.

The US on the other hand, is totally mucked up. I think could be worthwhile to revisit Peter Schiff's decoupling theories of a few years ago.

Sounds like you getting sucked in by the bear trap.

Interest rates are still 5% for mortgages and come with hefty fees, hefty deposits. You still pay stamp duties and estate agent fees on the whole process. In 99% of all case it works out renting is as cheap or cheaper than buying. Plus when banks write down the commercial property debt, you will see a lesser appetite for lending which means increased mortgage rates. Of course the BOE will keep their rates low. Japanese house prices still crashed even with the low rates of the BOJ.

[MrFlibble]

In the three months to May more public money was spent on construction than in any quarter on record.

http://brickonomics.building.co.uk/2010/07/a-last-hurrah-for-construction-before-the-axe-falls/

Ho Ho Ho Ho Ho

Ties in well with what Postseriousz told us.

I think RB is correct, the market is grasping at any news it can and running wild with it.

In this sort of market one can loose their shirt easily as fundamentals are out of the window!

[Bloo Loo]

Sounds like you getting sucked in by the bear trap.

Interest rates are still 5% for mortgages and come with hefty fees, hefty deposits. You still pay stamp duties and estate agent fees on the whole process. In 99% of all case it works out renting is as cheap or cheaper than buying. Plus when banks write down the commercial property debt, you will see a lesser appetite for lending which means increased mortgage rates. Of course the BOE will keep their rates low. Japanese house prices still crashed even with the low rates of the BOJ.

I really hope and pray that you meant Bull Trap.

[Sour Mash]

I can't believe it's 1.1%! definatly interest rate rise time the recovery is booming!

Ha ha ha - not bloody likely. Near zero base rates and printing massive amounts of money is all that has kept this show on the road and the BoE and government knows it.

[Realistbear]

With the massive drop in GBP, massive stimulus plus QE, Cash for clunkers, plus mega bank bailout a 1.1% growth is expected. However if you compare all those amounts of money spent than the growth is pretty small. Plus all that debt will have to be repaid or worse written off. UK, Europe, US & Japan are getting into a corner where more credit can not be created. Deflation is still the logical outcome. What we are seeing now is some really wild swings in stock markets and currency markets on lagging indicators. Also the complete mis judging of the first credit crunch, no one saw it coming. Are we better off now than at 2008?

We are seeing the last stages of the bear trap. Even RB is wildly swinging in his opinions although I think most of his bullish ones are sarcastic.

This is true. Its my way of dealing with the hype.

ITM I think this about sums up the FOREX euphoria this morning:

http://uk.finance.yahoo.com/news/pound-jumps-after-bumper-gdp-data-reuters_molt-f3795f15e07b.html?x=0

CAUTION AHEAD

Analysts and traders said sterling's gains may be limited, however, as later in the day the focus would switch to the European bank test results, due at 1600 GMT, which are likely to make investors wary of taking on risk.

They also warned that the second-quarter growth figures were likely to be as good as it gets for the UK, with the economy facing a number of headwinds as the government slashes public spending in an attempt to reduce high levels of debt.

"In the near term sterling could see more gains, but longer term the picture is more bearish as some of the more forward-looking indicators on the UK have been declining recently, which could leave the pound vulnerable," BNP Paribas' Stannard said.

Data from the British Bankers' Association on Friday showed mortgage approvals in Britain fell 8 percent in June from a year ago, while mortgage lending growth also slowed.

"Household confidence has been heading down recently and significant concerns over the strength and sustainability of the recovery may well be intensified by the extra austerity measures that were announced in June's emergency budget," Howard Archer, economist at IHS Global Insight said in a note to clients.

(Editing by Susan "Suzie" Fenton)

IMO, Sterling will be in the low 1.40's by early Autumn and may see some very rough patches around Crimbo possibly falling below 1.40. This is about where Paribas placed it some months ago. House prices will be a key factor and we are only just seeing some decent MoM drops.

[Bruce Banner]

With interest rates low it is now cheaper to buy than rent. I am a bear only in that I think house prices should be lower, if I was an STR I would be buying since the low interest on my cash pile wouldn't cover my rent. I think the arithmetic on to BTL gives a better return than many other investments, without capital gain/loss, I think the UK will survive.

The US on the other hand, is totally mucked up. I think could be worthwhile to revisit Peter Schiff's decoupling theories of a few years ago.

It isn't cheaper to buy than rent, even for a cash buyer.

I am an STR, STM to be more correct, And I wouldn't dream of buying now.

The interest I'd lose on the money I'd have to draw out of the bank to buy the house I'm renting would be considerably more than the rent I pay.

The above tells me that, at least in my landlord's case, BTL gives a worse return than cash in the bank.