Two years ago they were predicting that property prices in the regions were going to plummet as a result of government cutbacks and the property market would be in the doldrums. Central London property prices across the board have risen consistently by 3-5% over this time and now the outer regions are starting to enjoy some positive growth as they usually lag by 18 months from London’s example.
A healthy residential property market is good for a number of allied industries i.e. brown and white goods, retail spending, and, if the weather holds up, the retailers will be pleased with the autumn sales of clothes.
The Shale Gas revolution is keeping down fuel prices that will greatly assist inflation of food prices. If there is good weather in Europe over the harvest then this will help as well in keeping down inflation.
Despite Mark Carney’s attempts to keep down interest rates, and therefore borrowings, there is enough slack in the system for the consumer to soak up demand and for prices to remain stable without stoking inflation.
Sir Mervyn King’s pre-occupation with inflation (from the Governor of the Bank of England’s point of view) in Brown’s era has clearly been switched by Mr Carney so that its fulcrum is now unemployment – that is closer to the American model. The government’s Holy Grail is now to get unemployment down to 7% before the Election and the paradox is that the government doesn’t want this figure to drop too markedly before the Election since Mr Carney will ‘crank up’ interest rates at an injudicious time.
Although the Labour commentators wanted the Chancellor to adopt their Plan B in order to protect the fledgling growth of the UK Mr Osborne has been much more subtle by the imperceptible cut backs between 2012/2013 thereby allowing the economy to grow whilst at the same time exerting fiscal disciplines.
With real growth now taking place across many sectors (to include manufacturing, service industries, exporters) the Exchequers receipts from Income/Corporation Tax/VAT will start to flow through and we will see this in the Budget of 2014. It was this growth that was so absent between 2010/2012 that meant that the Chancellor had to reign back public expenditure, more so than he had planned, and extend the period of repayment of government debt across two extra years.
Although the Europeans love to ridicule the UK we have probably the fastest growing economy in Europe with one of the lowest unemployment rates. So, who is having the last laugh then?