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WRAPUP 1-Record low rates jolt UK economy closer to recovery

Published 10/12/2009, 07:05 PM
Updated 10/12/2009, 07:06 PM
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* UK house prices rise at fastest pace since May 2007 - RICS

* Retail sales enjoy biggest boost in 5 months - BRC

* Britain on cusp of recovery in Q3 - BCC

By Christina Fincher and Fiona Shaikh

LONDON, Oct 13 (Reuters) - Britain's unprecedented monetary and fiscal stimulus has helped reverse a slide in house prices, buoyed retail sales and pushed the economy closer to recovery, according to a trio of surveys on Tuesday.

The British Retail Consortium said retail sales rose at their fastest annual pace in 5 months in September. But it cautioned the rise was skewed by base effects, following a slump in sales in the wake of Lehman Brothers' collapse last year, and the timing of the August bank holiday.

Figures from the British Chambers of Commerce showed the decline in Britain's manufacturing and services sectors eased markedly in the third quarter, while a survey from the Royal Institution of Chartered Surveyors suggested house prices are rising at their fastest pace since the credit crunch began more than two years ago.

Economists had been expecting Britain to return to growth in the July-September period after more than a year in recession. However, such hopes took a knock last week after data showed a 2.5 percent drop in industrial output in August and policymakers are wary of false dawns.

The BRC said the value of like-for-like sales rose 2.8 percent in September compared with a year ago, the biggest rise since April, when sales were bolstered by Easter.

The value of total sales -- which includes new floorspace -- was 4.9 percent higher than a year ago, also the biggest rise since April.

"But we mustn't get carried away. They are compared with a weak performance last September," said BRC Director General Stephen Robertson. "Consumer sentiment is volatile and could weaken again."

HOUSE PRICE RECOVERY

The Royal Institution of Chartered Surveyors said 22 percent more surveyors reported price rises in the last three months than price falls, the highest since May 2007, before money markets froze and sent the world's financial system to the brink of collapse.

The findings tally with surveys from mortgage lenders which show that a combination of record low interest rates and tight supply are helping property prices reverse some of last year's hefty losses.

Figures from the Halifax last week showed prices have risen almost 6 percent since April. However, they are still nearly 5 percent lower than in September last year and economists have warned that the recovery could easily go into reverse should interest rates rise. In its quarterly survey of 5,500 firms, the British Chambers of Commerce said the pace of decline in domestic sales and orders was its slowest in more than a year.

The improvement in the survey was broad-based with almost all components returning to levels last seen before the collapse of U.S. bank Lehman Brothers last year triggered a global economic crisis.

However, the lobby group warned that conditions remained fragile and that after news last week of an unexpectedly sharp fall in industrial output in August, the economy likely stagnated or even continued to shrink in the third quarter.

"The Q3 results support our assessment that the UK economy is on the brink of leaving recession. However, the improvement is not sufficiently strong to allow us to conclude without doubt that GDP has already returned to positive growth," said BCC chief economic adviser David Kern.

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