Bank of England forecasts early signs of a return to growth. Purchasing Managers Index hits the magic 50 mark. Mortgage lending increases by £3.3 billion. UK sees 3.3% increase in retail sales. Are these early signs that the UK and Western European economies are looking at recovery?
Bank of England forecasts early signs of a return to growth
The Bank of England’s latest statistics indicate GDP growth of 0.2% between July and September and a further expansion of 0.4% next quarter. More impressive perhaps are the forecasts extrapolated by economists which outline steady growth continuing thereafter with forecasted expansion of GDP between 1.3% and an ambitious 2.2% in 2010. After 15 months of contraction, the first signs expansion in the British economy, since the start of 2008 is long overdue.
Purchasing Managers Index hits the magic 50 mark
As the UK PMI hits the magic number 50, suggestions that quarterly GDP growth is on the horizon become even more realistic. The services sector PMI rose to 53.2 in July its third consecutive month above the all too important 50 mark. Similarly and significantly the manufacturing PMI also rose above 50 in July, after months of contracting.
Reaching or exceeding the number 50 in both sectors is a significant turning point. A reading of 50 or higher generallyindicates that the industry is expanding. If manufacturing is expanding, the general economy should be doing likewise. As such, it is considered a good indicator of future GDP levels and is worth getting just a little bit excited about.
Mortgage lending increases by £3.3 billion
Speculation around economic recovery has seemingly boosted the confidence of lenders. The Council of Mortgage Lenders has announced that gross mortgage lending for July was up 26% on June’s figures. Mortgage lending totalled an estimated £16 billion in July up from £12.7 billion in June. The figures indicate a significant improvement in the housing market over the summer months after an exceptionally weak winter. However activity is still historically subdued, as July lending remains down 36% on figures for July 2008.
Similarly credit card lending has had a boost over the summer with the Bank of England reporting a £200 million increase in credit card lending. It is the most positive sign that larger card providers, such as MBNA (Europe’s largest credit card provider), are now more able to lend at low interest rates as they exit the credit crunch.
As both personal and commercial credit has become more difficult to source in the credit crunch, people and business have looked to other specialist forms of credit to help temporary cashflow situations. These have included less common options such as MBNA’s business credit cards and more traditional bank overdrafts.
UK sees 3.3% increase in retail sales
There is a significant possibility that the rise in mortgage lending over the summer has helped stimulate retail sales in the UK. The UK Office for National Statistics has published figures showing the volume of retail sales in July 2009 was 3.3% higher than in July 2008.
It is believed that increased confidence in the housing market has pushed up demand for household items by 4.5 per cent; the sectors highest growth in three years. Retail sales in food stores, clothing, footwear and textiles stores also showed positive year on year increases as consumers appear to return to the high streets.