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Brexit update: first trimester indicators are decidedly positive
September 23, 2016Article by Paul Avery
The Office for National Statistics this week treated the UK to a welcome confidence boost, throwing some statistical heft behind the inkling many of us have shared lately: the Brexit vote has not had a detrimental effect on the economy.
The Guardian reports that consumer spending, business activity and wage growth have all beaten forecasts, while unemployment is holding steady at an 11-year low, and exports have rallied as a result of the weaker pound.
Growth forecasts improve
By all accounts, post-referendum decision making by the Bank of England and the new Chancellor has been sound. A pledge of higher public spending in the August statement, reduction in the bank interest rate, and bonus spree of bond buying amount to what the OECD has drily pronounced “appropriate policy support”. A soprano in the doomsday choir soundtracking July’s vote, the Paris-based think tank has “changed its tune” according to chief economist Catherine Mann, duly revising its 2016 UK growth forecast to 1.8% – 0.1% higher even than its pre-referendum projection.
Although we aren’t exactly out of the woods yet, with longer term effects yet to emerge from the treeline (and important detail on service sector performance arriving imminently), initial results couldn’t be more encouraging.
Property market exceeding expectations
Better yet, and especially lip smacking to those of us in the property sector, house buying has held strong over the summer. HMRC counted 109,630 property transactions in August, up slightly on the same month last year (though some of these were initiated before the vote). After its momentary wobble – Halifax calculates just a 0.2% slide in August – the property market is purring contentedly once more, with prices expected to climb in the coming months. Building on a pattern of sunnier and sunnier predictions since the vote, The Royal Institute of Chartered Surveyors now envisages average price growth of 3.3% p.a. over the next five years.
August’s interest rate reduction promises to help home buyers get cheaper mortgages and will likely dampen appetites for bonds, making property a comparatively more attractive investment. And with the exchange rate still subdued at £1.30 to the dollar, it is a particularly good time for investors to get a piece of the UK property market.
We’ll keep you posted as the dust continues to settle in the coming weeks.