Two indicators of deceleration are underway after the Bank of England warned of a 15-month recession | Business newsletter
Just a day after the Bank of England warned of a 15-month recession, there are signs in housing and hiring that the downturn is well underway.
Friday’s figures showed home prices fell in July (monthly) for the first time in more than a year, with warnings that the market is likely to weaken further after the bank raised interest rates from… 1.25% to 1.75%.
Bank interest rates are now at their highest level since 2008, when the bank struggled to combat inflation, which stands at 9.4% – well above its 2% target – and is forecast to surpass 13%. later this year.
It comes as households face record increases in energy bills, and mortgage lender Halifax says this rapidly rising cost of living will hit the market, as Buyers seek to curb spending.
In July, the median house price stood at £293,221 – down £365 or 0.1 per cent from the previous month’s record high. However, on a year-over-year basis, prices are still up 11.8%, compared with 12.5% in June.
Russell Galley, Halifax CEO, said: “Home prices are likely to come under more pressure as those market trends fade and the opposite trends of rising interest rates and the cost of living rise. will be more stable.
“Therefore, a slowdown in year-over-year home price inflation still seems to be the most likely scenario.”
It comes after a report from rival lender Nationwide showed Home prices rose in July, but at slowest monthly rate in a year.
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Bank of England data also showed the lowest number of new mortgage approvals in two years in June.
The bleak outlook also leads businesses to hire fewer employees, as they also become more cautious.
A study of 400 employers by the Employment and Employment Federation and KPMG found that businesses – facing rising costs from energy prices and inflation – are “rightly hesitant” about their plans. their recruitment plan.
Claire Warnes, of KPMG, said: “The trend of uncertainty in the UK job market over the past few months has continued, as overall hiring continued to decline in July.
“With the challenging economic outlook, employers are really hesitant about their hiring plans, but, to combine this, the lack of suitable candidates and the overall skills shortage in most fields are holding high starting salaries.”
Kate Shoesmith, deputy chief executive officer of REC, said: “The job market remains solid. Demand for employees continues to grow as it has since the start of 2021, increasing in every sector.
“Starting salaries are still on the rise, which is a good time for job seekers to look for their next role.
“However, growth in fixed hires has slowed in recent months. We see rising fuel and energy prices, inflation and labor shortages affecting employer confidence. .
“Labor and skills shortages are also limiting opportunities for both the private and public sectors to meet consumer demand.”
Over the past week, closely watched PMI surveys also showed signs of slowing down in service, make and construction industries.
All this poses a major challenge for the next prime minister, as Conservatives prepare to choose between Rishi Sunak and Liz Truss for the role.
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In Sky News’s Special #10 Leadership Battle on Thursday NightMs Truss said a recession was not inevitable, adding: “We can change the outcome and we can make the economy more likely to grow.”
When her rival Mr. Sunak was asked if anything could be done during the recession, he said: “Of course there is.”
He said that “containing inflation” would be the best way to prevent a recession. our kids and our grandchildren to choose tabs, because that’s not right. That is not responsible. “
