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Uk Consumers Brush Off Rate Rise, Ft.

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UK consumers brush off rate rise

Consumers appear to have brushed off this month’s surprise hike in interest rates with retail sales in August growing at their fastest pace in over 18 months, according to the latest survey from the CBI.
In its Quarterly Distributive Trades survey, the employers’ organisation found 33 per cent of retailers said their sales were below those of a year ago, while 45 per cent said they were higher.
The positive balance of 12 per cent is the highest since the 33 per cent recorded in December 2004 and is much stronger than forecasts. Retailers are also optimistic about the immediate future, with a balance of 13 per cent expecting an improvement in September.
Sterling initially spiked higher and
money markets shortened the odds on another increase in the cost of borrowing
before the year is out as traders also noted signs of building inflationary pressures contained in the report.
The CBI said that despite intense competition,
retailers have been more successful in passing on the high costs of energy and foodstuffs. A positive balance of 12 per cent of retailers said their average prices had risen in August. This is the first time in two years they have been able to make mark-ups stick and respondents expect further increases in the months ahead.
John Butler at HSBC said: “The improvement on the high street continues, with some tentative evidence that retailers intend to finally pass through higher costs into their prices. That combination of stronger activity and inflation make this a hawkish signal for future rates.”
Those sectors enjoying the fastest sales growth included grocers and durable goods stores, the latter still benefiting by demand for electronic goods such as flat-screen TVs, said the CBI.
However, sales declined in shoe shops, bookshops and specialist food retailers.
The optimistic bent of the household sector was further illustrated by the latest official data on lending.
Figures released from the Bank of England showed the housing market defied the summer heatwave, with the number of mortgages approved for home purchase in July hitting their highest level in six months.
The report provides further confirmation that the housing market has picked up pace this year, a robust performance that was one of the reasons cited by the Bank of England for its recent decision to increase in the cost of borrowing by 0.25 percentage points to 4.75 per cent.
Richard McGuire at RBC Capital Markets said the report painted an upbeat picture of the housing market but added: “The importance of this release from a policy perspective is limited by the fact that they pre-date the August hike and, as such, appear somewhat historical in nature.”
In its latest monthly report on Lending to Individuals, the Bank said there were 120,000 loans approved for buying a home, compared to a downwardly revised 119,000 in June. This was the highest since the 120,000 recorded in January.
Households borrowed a net £10.9bn in July, up from £9.8bn the previous month and above the six month average of £10bn.
Net mortgage lending rose from £9bn in June to £9.8bn last month, the highest level since September 2003 - though this figure is partly a reflection of the rising cost of residential property.
Borrowing by consumers increased by £1.1bn, taking the 12 month rate of growth down to 7.2 per cent.
Mr McGuire described this pace of growth as “moribund” and said it partly reflected institutions tightening their lending criteria in relation to unsecured borrowing in the wake of an increase in personal defaults and bankruptcies

This report contains clear, albeit anecdotal eveidence of the one thing King says MPC are extremely worried about, namely 2nd round inflation effects, with inflation pass through happening on the high street with more increases in the pipeline.

If the MPC ignore todays data and hold rates next week then their inflation targeting credentials are in tatters. IMO a 0.5% hike is needed next week as a wake-up call

Edited by jp1

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UK consumers brush off rate rise

This report contains clear, albeit anecdotal eveidence of the one thing King says MPC are extremely worried about, namely 2nd round inflation effects, with inflation pass through happening on the high street with more increases in the pipeline.
If the MPC ignore todays data and hold rates next week then their inflation targeting credentials are in tatters. IMO a 0.5% hike is needed next week as a wake-up call
the medicine hasn't worked - another dose, and make this one a double!
:P

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the medicine hasn't worked - another dose, and make this one a double! :P

Absolutely. Re-inforced after reading this report aswell:

http://news.bbc.co.uk/1/hi/business/5297672.stm

Earlier this month the Royal Institution of Chartered Surveyors (RICS) predicted that house prices were likely to rise even faster in the coming months.

Its latest survey suggested that prices in July had been rising at their quickest rate for two years.

The number of enquiries from prospective buyers also rose, for the 14th month in a row.

Whilst we have had lots of bearish news, things are still chugging along it seems.

AFP

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haha i can see rates going up to 8% in the next few years to control inflation because the uk public is stupid. they have no control of finances, most don't know who their mortgage provider is - and are only led by those big pink star sticker "intro" offers - no intelligence. Also uk imports will slow. Somone has to pay for all this debt sometime, can't keep telling the bank manager you will pay him next week. The only thing browny boy is trying to do is delay the inevitable - business cycle. global economic boom times are slowing, and this house price bubble premium pricing methodology will POP big time.

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haha i can see rates going up to 8% in the next few years to control inflation because the uk public is stupid. they have no control of finances, most don't know who their mortgage provider is - and are only led by those big pink star sticker "intro" offers - no intelligence. Also uk imports will slow. Somone has to pay for all this debt sometime, can't keep telling the bank manager you will pay him next week. The only thing browny boy is trying to do is delay the inevitable - business cycle. global economic boom times are slowing, and this house price bubble premium pricing methodology will POP big time.

Gordy has to delay it long enough to become Prime Minister (might manage that) and if possible until after the next general election (unlikely, unless of course he calls it early 'cos he knows what's just around the corner)...

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...(unlikely, unless of course he calls it early 'cos he knows what's just around the corner)...

If he does Brown will [literally] loose his Balls

NuLabour have been spending hundreds of thousands of our money to challenge a boundary change which means Ed Balls - Browns trusty right hand man will loose his seat:

TAXPAYERS face a legal bill for up to £ 350,000 to help Labour stop the constituency of Gordon Brown's chief ally being abolished

The other day they withdrew their challenge, which means if Brown calls a snap election Balls is out on his **** :lol:

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As we all know, it's about sentiment, not affordability.

You could sell a kilo of horse shit for 10 grand, if people really believed it would go for 20 grand next year.

Someone would buy it for 20 grand next year, if they thought it'll sell for 30K year after.

It's not about affordability, and it's not about people's stupidity either, it's simple economics.

When the confidence goes, only then will there be a change in the pattern.

Personally, I have no idea when the change in sentiment will take place. There have been SO MANY theories of what it will take for sentiment to change, but so far, it hasn't budged an inch.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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