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response from ING economists, with prediction of house price fall:

We remain particularly concerned about the prospects for consumer spending given increasingly gloomy evidence from retailers and a growing probability of a

house price correction (we look for a 10% price fall in 05), which will

negatively impact on consumer sentiment. The BRC recently reported that the

Christmas trading period was the worst in a decade while consumer borrowing

appears to be on a slowing trend. The situation will deteriorate further if,

post election, the government has to either curb its spending or raise taxes in

order to contain borrowing. Consequently, deflationary pressures on the high

street look set to intensify.

We are also worried by signs that labour market prospects are weakening with

falls in the employment components of both the CIPS manufacturing and

non-manufacturing surveys seen in December. Coupled with the fact that the

industrial sector is on the verge, if not already in recession, and energy

prices look set to continue falling, we believe that inflation will undershoot

the BoE's CPI forecast throughout the next two years. This will give the Bank of England the scope to respond to anticipated weakness in the UK economy. We

expect two 25bp cuts before year-end.

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From Reuters. http://www.reuters.co.uk/newsArticle.jhtml...section=finance

Factory output unexpectedly drops

Thu Jan 13, 2005 10:48 AM GMT

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By Ross Finley and Anchalee Worrachate

LONDON (Reuters) - Factory output fell unexpectedly in November, for the fifth month in the past six, bolstering the chances interest rates will remain on hold at 4.75 percent later today and perhaps for months to come.

The Office for National Statistics said that manufacturing output dropped 0.1 percent in November, matching the unrevised fall for October and confounding economists' expectations for 0.3 percent rise.

The unexpected drop left the level of manufacturing output, which accounts for just over 17 percent of the economy, unchanged on a year ago.

Official data on manufacturing remain much more gloomy than private industry surveys and policymakers have said that the figures are probably overstating the weakness.

Analysts said the data supported widespread expectations in financial markets that the Monetary Policy Committee will announce unchanged interest rates at noon on Thursday.

"The disappointing manufacturing output data does not make it any less certain that the Bank of England will leave interest rates unchanged later today," said Howard Archer, economist at Global Insight.

Government bonds pared earlier losses while the pound slipped slightly against the dollar to trade near $1.8865.

Within manufacturing, the ONS said the monthly drop in November was driven by a 1.9 percent fall in output chemicals and man-made fibres industries, which was offset somewhat by a significant 1.3 percent in the transport equipment industries.

WEAKER Q4 GDP?

Economists also said that the disappointing figures meant that there was little chance of production industries boosting fourth quarter gross domestic product growth, which is still expected to have picked up from below-trend in the third.

"It's likely that the contribution to Q4 GDP is going to be negative from the industrial output and manufacturing side. So Q4 might not be as strong as people are forecasting," said Jeavon Lolay of Lloyds TSB in London.

Meanwhile the ONS said that industrial output as a whole, which accounts for nearly one quarter of GDP, rose 0.2 percent in November, breaking a five-month streak of falls.

But that gain, which was driven in part by output in the energy industry, was still less than the 0.4 percent economists had expected and left the level of industrial output down 0.9 percent compared with a year ago.

On a three month annual basis industrial production fell 1.3 percent after a 1.1 percent drop in the prior three month period. Production was down 1.3 percent in the three months to November compared with the prior three month period.

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The unexpected drop left the level of manufacturing output, which accounts for just over 17 percent of the economy, unchanged on a year ago.

Since when did 17% of anything amke a heck of a lot of difference to the whole?

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With the background of weakening UK data. The odds start to favour a cut in rates at the back end of the year.

However this could be delayed if inflation rears its ugly head.

The BofE might be faced later in the year by an economy and world economy looking like it will grow sub trend in 2006 AND higher inflation on the two year outset. In this situation they will worry about inflation, hold rates level for longer or even raise them and the UK will get a painful experience and those cheap houses.

However little sign of inflation causing serious trouble and the economy is slowing down then I think this could happen...In regard to the property market. It seems UK public are more aware about base rates/movements etc. Therefore it may be that a lot of sellers will not budge their prices and just hold out...waiting for the rate cuts that will come in late 2005 or early 2006 that will allow individuals to borrow more debt particularly the interest only mortage crowd and reignite the housing market (appreciation bubble)

P.S. I want prices to fall. Just looking out ahead at what could happen

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ZZg,

Couldn't agree more. when people tell us these stories about factory outputs and the manufacturing sector being hurt by rate hikes I always think of one thing.

What manufacturing? Stop kidding ourselves for a minute , we are a nation that buys everything and believes that we deserve everything. We can buy everything we want because of the cheap money available in the UK. This same cheap money is worth a fortune abroad.

The only thing foriegn bodies and want from the UK is the pound they do not come here for anything else.Anyone who beleives that we are attractive to foriegn investors on merit is a joker. The pound is the only thing worth gaining from the UK. The government knows this and will do what it can to protect its one and only asset worth holding, the pound.

Yes , I'm afraid it has come to this but what should we expect having sold everything we own and virtually closed down all our own industries.

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Don't forget this is a market chaps. It doesn't respond to every little thing that might or might not happen. It responds to general things.

General things like the lowest mortgage approvals in December for 10 years.

General things like most people are now aware prices are falling or about to fall or might fall.

So, there is a lack of confidence in the market.

The only way is down.

Its a matter of time.

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Guest Charlie The Tramp

BBC lunchtime news quoted retail spokesman saying the drop in consumer spending over the holiday period was not as bad as they first stated. :D

The MPC are treading very cautiously, as for the first time in recent history, they have to consider the massive debt bubble heading towards 1.1 trillion by summer, an increase of 10% over the past year. :(

The hold this month is a sure sign IMO that rates are on the way up, and historically could hit 6% by summer 2006. :(

The pain is now about to be felt among those who have overstretched and borrowed to the hilt, and financial ruin is coming their way. :blink:

Was the 4x4, luxury jeep, or the 3k plasma home cinema system, or the holiday home in the Med worth it? <_<

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In regard to the property market. It seems UK public are more aware about base rates/movements etc. Therefore it may be that a lot of sellers will not budge their prices and just hold out...waiting for the rate cuts that will come in late 2005 or early 2006 that will allow individuals to borrow more debt particularly the interest only mortage crowd and reignite the housing market (appreciation bubble)

P.S. I want prices to fall. Just looking out ahead at what could happen

It is important to constantly keep in mind the herd instinct. Once HPs start falling, people will lose confidence in them and will sell 'at any price'. Once this happens almost irrelevant what happens to int rates. Remember 92 -95! :D

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BBC lunchtime news quoted retail spokesman saying the drop in consumer spending over the holiday period was not as bad as they first stated. 

The MPC are treading very cautiously, as for the first time in recent history, they have to consider the massive debt bubble heading towards 1.1 trillion by summer, an increase of 10% over the past year. 

The hold this month is a sure sign IMO that rates are on the way up, and historically could hit 6% by summer 2006. 

The pain is now about to be felt among those who have overstretched and borrowed to the hilt, and financial ruin is coming their way. 

Was the 4x4, luxury jeep, or the 3k plasma home cinema system, or the holiday home in the Med worth it? 

Ah yes the holiday home in Europe's countrysides. People living in tiny villiages and Spain and France would have about as much chance of seeing 200,000 Euros in their lives as they have of seeing a flying unicorn. But, fear not MR and Mrs UK BTLer are at hand and feel a foriegn holiday home that they can also rent out is essential for their portfolio which has a LTV ration of around 90% already. So they take along with them some idiot who's acting as a local expert and proceed to hand over 150,000 - 300,000 Euros for some unusable breeze block ex-slaughter house without foundations. :P:D

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Was the 4x4, luxury jeep, or the 3k plasma home cinema system, or the holiday home in the Med worth it?  <_<

Think how cheaply I'll be able to take them off their hands in a year or 2, depreciate like theres no tomorrow, reckon one of them plasma's would bring my new 'cheap' house to life :D

Actually, I presume all the repo'd stuff from the chav's gets sold at auction ??

Just thought it may be worth knowing ;)

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Unlike 1992-1995 we have borrowed much, much more money. F*cking shed loads to use a technical term.

If the economy splutters and people start losing jobs we're all in trouble even those of us who don't own houses. The easy credit tap has been switched off. All sections of the economy are about to take a bit of a pounding.

And we can't all claim incapacity benefit you know, although that would be one way of setting a new low for unemployment figure ;)

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Guest Charlie The Tramp
Actually, I presume all the repo'd stuff from the chav's gets sold at auction ??

Watch out for the postcards on the customer sale boards in the supermarkets, or articles for sale in the local rags. They will sell off before the bailifs arrive. <_<

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If the economy splutters and people start losing jobs we're all in trouble even those of us who don't own houses. The easy credit tap has been switched off. All sections of the economy are about to take a bit of a pounding.

I think people overestimate the effect that a lowering of house prices would have on the economy. Only 10 million people in the UK have any kind of mortgage at all; that's less than a sixth of the total population.

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I think people overestimate the effect that a lowering of house prices would have on the economy. Only 10 million people in the UK have any kind of mortgage at all; that's less than a sixth of the total population.

That's 50% of the working age population though. Presumeably the 12m people of working age who are "economically inactive" ( on sickness benefit ) or unemployed, are not the same ones as the 10m who have mortgages...... :P

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Since when did 17% of anything amke a heck of a lot of difference to the whole?

Fair point, but with consumer spending slowing quite sharply, it's another leg kicked away isn't it? Also the treasury's and BoE's central projections are for industrial output & investment to accelerate as consumer spending slows gently, hence delivering the fabled soft landing. It doesn't look like that will happen, and what I thought was interesting in the link was that the figures were below expectations.

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But if UK data weakens, the £ will fall, especially with US raising its rates, and weak £=more inflation.

I agree on this point. In fact this afternoon I listened to the head of global strategy for a major US and European Investment House state that $ would start to rise against euro and sterling and he reckoned the year end £1=$1.80. Turning point being around March/ April time and geared towards US Trade deficit showing the first signs of improving. A compelling argument plus throw in the interest rate differential argument and that everyone is bearish on dollar and will cover those short positions, the turn could be fast and rapid.

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  • 441 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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