UK Growth Outlook Lowered; Home Prices Rise

Arthi Gupta
29 Nov, 2011
New York City

The UK indexes dropped after the growth forecast for the UK economy was lowered. The mortgage approvals for home purchases rose in October and home price growth accelerated in November.

[R]3:30 PM London – The UK indexes dropped after the growth forecast for the UK economy was lowered. The UK's mortgage approvals for home purchases rose in October and home price growth accelerated in November.[/R]

UK stocks edged lower tracking cautious trading in Europe and weak domestic economic data.

Chancellor of Exchequer George Osborne said in Parliament that UK economy this year is expected to grow at a 0.9% compared to the previous estimate of 1.7% and the growth is estimated to fall further to 0.7% in 2012 compared to the estimate of 2.5%.

Osborne also said that the decision to increase the pension age for government workers to 67 is estimated to save £59 billion will be implemented by 2026.

The lower than estimated growth will force the government to borrow more £111 billion over the next five years and increasing the total borrowings in the period to £479 billion, according to the Office for Budget Responsibility.

In London, FTSE 100 Index declined 15.11 or 0.3% to 5,296.65 and the pound edged higher to $1.5621.

UK Mortgage Approvals Up

The UK's mortgage approvals for home purchases increased in October, the Bank of England said today. The number of loans approved in October totaled 52,743 compared to 51,193 in September.

Total lending to individuals rose by £1.3 billion in October, greater than the previous six-month average increase of £1 billion. The annual growth rate was unchanged at 0.8%.

Lending secured on dwellings rose by £1.3 billion, greater than the previous six-month average increase of £0.6 billion.

In a separate communiqué, the BoE said M4 money supply fell 0.3% on a monthly basis and declined 2.7% on a yearly basis in October.

UK Home Prices Rise

UK home price growth accelerated in November, survey data published by the Nationwide showed today.

Average home price increased 1.6% in November from a year ago, double the 0.8% rise logged in October.

On a monthly basis, home prices rose 0.4%, the same rate of increase as seen in October. The price of a typical home is now £165,798.

Gainers & Losers

ACM Shipping Group plc dipped 0.4% to 123.50 pence after the shipbroker reported first-half revenues declined 9% to £13.2 million from £14.5 million. Pre-tax loss in the period was £4.96 million compared to a pre-tax profit of £2.76 million.

BHP Billiton PLC gained 0.3% to 1,841 pence after the diversified natural resources company announced the review of its diamonds business, comprising the group's interests in the EKATI Diamond Mine and the Chidliak exploration project in Canada.

EnQuest Plc soared 11.5% to 101.50 pence after the oil and gas production and developer sanctioned the development of Alma and Galia fields at a cost of $850 million, subject to regulatory approvals. The new fields are expected to increase production over 40,000 Boepd in 2014.

Seagate Technology plc surged 5.5% to $15.99 after the hard-drive maker forecast second quarter revenues of $2.8 billion, with unit shipments of nearly 43 million.

For the third quarter, the company expects revenues to be at least $3.75 billion, and unit shipments to increase sequentially.

WPP Plc rose 0.9% to 649 pence after the Irish advertising company announced that it took a minority equity stake in mobile device based consumer insight firm Lumi Technologies Ltd.