Some commentary has claimed that this week's Royal Institution of Chartered Surveyors (RICS) survey for December signals renewed housing market weakness. Hardly. The survey suggests a slowdown in price gains – unsurprising given a 14% annualised rise in the Halifax index over the last eight months – but a further increase in turnover.
True, the buyer enquiries index has fallen significantly from its peak in June last year. It remains, however, firmly in positive territory, consistent with further gains in mortgage approvals and transactions – see first chart. The new instructions index, meanwhile, has picked up recently but is still below buyer enquiries, suggesting that demand continues to outstrip supply.
Commentators have also interpreted the British Retail Consortium (BRC) December sales survey, showing a rise in annual sales growth from 4.1% to 6.0%, as evidence of a pick-up in consumer spending. The increase, however, may have been due to higher inflation rather than stronger volumes – the annual gain in the BRC's shop price index accelerated from 0.2% to 2.2% in December.
Manufacturing output figures for November, released today, were disappointing, showing no increase from October. Relative to its pre-recession peak, however, UK output is at a similar level to France and higher than in Germany, Japan and Italy – second chart. In other words, the smaller recent recovery in the UK partly reflects a less severe prior decline.
