UK house prices fall at fastest rate in two years; factories suffer ‘lethal cocktail’ – business live

Last modified: 03: 03 PM GMT+0

Average UK house prices fell 1.4% in November, as “the fallout from the mini-budget continued to impact the market,” says Nationwide


America’s manufacturing sector has contracted for the first time since June 2020.

Data provider S&P Global reports that output declined in November, as new orders fell at a faster speed.

It’s US manufacturing PMI has fallen to 49.0, from 50.2 in October, a level that shows activity fell.

The downturn was the sharpest since May 2020, and driven by declines in output and new orders, reports S&P Global, adding that:

Demand conditions weakened in domestic and external markets, as new export orders fell further. Employment growth slowed as pressure on capacity dwindled and backlogs of work contracted strongly.

On a more positive note, supply chains improved for the first time since October 2019, with price pressures softening as a result of reduced demand for inputs from firms. Input costs rose at the slowest rate for two years.

⚠️ BREAKING: US ISM MANUFACTURING PMI ACTUAL 49.0 (FORECAST 49.7, PREVIOUS 50.2) $MACRO

— Breaking Market News ⚡️ (@financialjuice) December 1, 2022

Over on Wall Street, the S&P 500 index has opened 0.3% higher.

The share index is up 11 points at 4,091.

U.S. stock index futures ticked higher Thursday after the Federal Reserve’s preferred inflation gauge showed inflation cooling in October, while reports suggested China is taking steps to relax its Covid restrictions to allow its economy to recover: https://t.co/ljVUSCucLC pic.twitter.com/EdXPV1xYZw

— MarketWatch (@MarketWatch) December 1, 2022

Europe’s energy squeeze intensifies:

CHART OF THE DAY: Electricity prices in the Nordic region have jumped to sky high levels so far this week, overshadowing the tightness in Germany, France and the UK. On a weekly average, Nordpool day-head is just under €350 per MWh, its second highest weekly ever | #EnergyCrisis pic.twitter.com/sBeI8UwsvB

— Javier Blas (@JavierBlas) December 1, 2022

#Breaking Administrators for Joules will shut 19 shops today after the fashion brand was bought in a rescue deal by retailer Next and founder Tom Joule pic.twitter.com/LjNdbjXuiV

— PA Media (@PA) December 1, 2022

Next has confirmed it has acquired some of the assets of collapsed fashion brand Joules, in a partnership with its founder Tom Joule, for £34m.

Next are also buying Joules’ head office for £7m cash.

Administrators for Joules will shut 19 shops today, cutting 133 jobs.

John Coldham, retail partner at the law firm Gowling WLG, says:

Next is continuing its acquisition spree, increasing its competitiveness by building a strong stable of respected brands from across the spectrum of homewares and fashion.

The global interest in the Joules brand in the bidding process just goes to show what reach Next may be able to achieve internationally as well as at home. Retail is an unforgiving environment at the moment, but strong brands are one of the keys to encouraging consumers to keep coming back.

Updated

The pound continues to rally, against the euro as well as the dollar:

Pound up above $1.22 vs US$ today. Highest level since early Aug. Partly seems to be a story of dollar weakness, but worth noting sterling also up vs euro, to nearly €1.17 pic.twitter.com/qUFV8ZPyrK

— Ed Conway (@EdConwaySky) December 1, 2022

The US Federal Reserve’s preferred measure of inflation has slowed.

The PCE index, which measures prices paid for domestic purchases of goods and services, rose by 6% in the 12 months to November, down from 6.3% in October.

Core PCE slowed to 5% from 5.2%, which may reassure central bank policymakers that recent interest rate rises are cooling inflationary pressures.

The Fed's preferred #inflation gauge rose at a slower pace in November, with the PCE +6% vs. +6.3% in Oct. Core rate also slowed down. Jobless claims pulled back from a 3-month high -16K to 225K. #DOW +15

— Jason Brooks (@brookskcbsradio) December 1, 2022

Core PCE: increasing at a 4.8% three month average and is up 4.984% on a year ago basis. Sequential slowing in the one of the Fed’s key policy variables. My sense is that it’s going to sticky around 4%. And everyone should start looking at services ex-housing going forward.

— Joseph Brusuelas (@joebrusuelas) December 1, 2022

U.S. TREASURY YIELDS FALL AFTER PCE DATA; 10-YEAR YIELD DOWN 12.50 BPS ON DAY AT 3.576%

Stock News Alerts In Bio

— Yelpful Stock Alerts (@FastestAlert) December 1, 2022

US weekly jobless claims drop

Fewer Americans filed new claims for unemployment support last week.

There were 225,000 initial claims filed in the week to November 26th, down from 241,000 the previous seven days.

However, the number of people receiving support for at least two weeks jumped by over 110,000, to 1,337,838

Initial jobless claims drop back but continuing claims rise to the highest February. pic.twitter.com/fkP8ncj6TZ

— Kathy Jones (@KathyJones) December 1, 2022

“Waves of industrial action are having a crippling effect on British businesses”, reports Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:

She points out that problems are set to pile up further as fresh strikes hit the UK in December.

Already in October, one in eight companies said they were affected by walk outs (see earlier post). The toxic combination of rail and postal strikes are taking a heavy toll on firms, with a quarter of those affected unable to obtain the necessary goods for their business.

Another 24% of businesses said they were unable to operate fully, while 23% couldn’t get hold of the services they needed.

Next picks up collapsed fashion chain Joules from administration

Next has picked up collapsed fashion chain Joules from administration, saving more than 100 shops and hundreds of jobs, the Guardian understands.

Sources said Next placed a last-minute bid in the early hours of Thursday morning, trumping one placed by South Africa’s Foschini Group, the owner of Hobbs and Whistles.

Joules called in administrators last month, putting 1,600 jobs and the future of the retailer’s 132 shops at risk, after failing to secure emergency funding. Shops have continued to trade as administrators from Interpath Advisory said they would “assess options for the business”.

Joules, which is best known for its jackets and patterned wellington boots, has been struggling for months with falling sales. It has attributed the slower trade to the cost of living crisis and the UK’s dry and hot summer, which reduced demand for its posh wellies.

Bloomberg’s John Stepek points out that UK house price rises are lagging behind annual inflation:

House prices in the UK fell last month by 1.4%. That’s the second monthly drop in a row, at least according to Nationwide.

And if you leave out the period of 2020 when the housing market was basically shut down, it’s the largest monthly fall seen since February 2009. Which was, of course, in the wake of the financial crisis.

So quite a big fall then. It means house prices are now just 4.4% higher than they were last November (and that’s just in nominal terms. If you take inflation at well over 10% into account, we’re already down significantly in “real” terms).

House prices are now clearly falling in the UK

But how far will they drop? @John_Stepek takes a closer look https://t.co/kjQcH06ZTz

— Bloomberg UK (@BloombergUK) December 1, 2022

Updated

Looking back at this morning’s drop in house pricesNathan Emerson, Chief Executive of Propertymark, the UK professional body for estate agents, says the market is ‘rebalancing’.

“Our agents report a rebalance within the market as competition for homes starts to slow, so it is no surprise that the house price growth is also slowing in line with this.

“This knock-on effect being seen in prices achieved is positive as we need to see this settle in line and a return to a more realistic and sustainable market. However, prices remain higher than last year, and with the Stamp Duty threshold raised, it remains a good time to buy or sell a property.”

Next snaps up collapsed fashion retailer Joules, says Sky News

Revealed: Next has managed to secure a deal to snap up the fashion retailer Joules out of administration, trumping rival bidder Foschini Group at the last minute of a fraught auction process.

— Mark Kleinman (@MarkKleinmanSky) December 1, 2022

UK companies expect to raise their prices by 5.7% in the coming 12 months, according to a new survey from the Bank of England that shows inflationary pressures continue to grip the economy.

Businesses on average reported that they have raised prices by 7.2% over the 12 months to November, the smallest amount since April.

Interesting nuggets in the Bank of England's monthly survey of businesses:
- firms plan to raise prices by 5.7% over next 12 months (smallest since Feb)
- but CPI still seen at 3.7% in 3 years' time
- higher rates to lower investment by 8% and employment by 2% over next year

— David Milliken (@david_milliken) December 1, 2022

UK firms expect to raise prices 6%, see inflation lingering https://t.co/E6ezm0gIsd pic.twitter.com/KJnkMakSjO

— Zoe Schneeweiss (@ZSchneeweiss) December 1, 2022

A HSBC branch in London.
A HSBC branch in London. Photograph: Tim Ireland/PA

HSBC’s CEO appears to have called for caution from UK ministers pushing for a Big Bang 2.0, saying the UK should consider “fine-tuning” regulations and make sure it is not running ahead of global rules that could put banks at a disadvantage.

Speaking at the FT Banking Summit this morning, Noel Quinn said the UK regulatory environment was strong, not least due to its “credibility” and “predictability”.

However, he took a more cautious view of what has been peddled as a potential bonfire of regulations meant to boost financial services post-Brexit:

“It’s right to continue to look at the regulatory environment and see all the ways that it can be fine-tuned and developed. So I probably take upon a difference on the concept of Big Bang 2.0.

“I think [this is] more a case of where there is an ability to continue to refine the regulations to make sure London remains competitive”.

He said that could include easing the UK’s ringfencing rules, which since the financial crisis have require banks to separate their retail banking deposits from investment banking operations to ensure everyday customers’ money is not put at undue risk.

Quinn suggested that easing those rules - which are currently only being floated for smaller banks in order to boost competition - would release liquidity and help “sustainable” investment in the UK.

The HSBC boss insisted that the UK was “still very investable”, even after the disastrous mini-budget. However, he said prime minister Rishi Sunak has brought a sense of “stability” and “competence” that is now being reflected in markets.

Quinn said:

“That clearly was a very difficult period of time and some credibility was lost at that period of time.

And there was concern about the imbalance between fiscal and monetary policy that has been regained with the actions that have been taken by the current government by the current administration. And I think the markets reflect that stability”

The pound has hit a 16-week high against the US dollar, despite the contraction at UK factories and the fall in house prices last month.

Sterling has gained around a cent to $1.2157, its highest level since mid-August.

The pound vs the US dollar
The pound vs the US dollar Photograph: Refinitiv

The dollar has fallen after America’s top central banker, Jerome Powell, suggested yesterday the US Federal Reserve could make smaller interest rate increases at future meetings.

However, Powell did also caution that monetary policy is likely to stay restrictive for some time until there are real signs of progress fighting inflation.

Joel Kruger, market strategist at LMAX Group, reckons investors heard what they want to hear from Powell and are too optimistic:

The market has responded with exuberance to the latest Fed Chair comments. The key focus has been on the part where Powell talked about a slowdown in the pace of rate hikes. This was taken as a massive relief to investors. Although the other parts of what the Fed Chair communicated were still very much committed to policy remaining restrictive for some time to beat inflation. Therefore it does feel like the market reaction may have been overly optimistic. And once again, a lot of what should be expected going forward is going to come down to how future rounds of inflation data come out.

We’ve also seen some upbeat sentiment around the prospects for a China reopening, though again we think the market needs to proceed with caution on this front.

Updated

One in three UK firms short of workers

A third of UK businesses are suffering a shortage of workers, the latest ‘business insights’ report from the Office for National Statistics shows.

Firms in the ‘Human health and social work activities’ sectors were worst affected, with 54% saying they are short of staff.

32% of businesses with 10 or more employees said they were experiencing a shortage of workers 🧑🏻‍🤝‍🧑🏻

The human health and social work activities industry reported the highest percentage (54%). pic.twitter.com/ykTQzUJbDi

— Office for National Statistics (ONS) (@ONS) December 1, 2022

The ONS also reports that 41% of companies experienced a rise in transportation costs in October.

Input price inflation and energy prices remain the top two concerns reported by businesses, at 25% and 19%, respectively.

One in eight businesses had been affected by industrial action in October 2022; with 27% of those companies unable to obtain necessary goods for their business.

13% of trading businesses were affected by industrial action in October 2022.

Of those 27% said they were unable to obtain necessary goods for their business.

️➡️ https://t.co/kvJyAEwiPH

— Office for National Statistics (ONS) (@ONS) December 1, 2022

The number of UK households in fuel poverty will increase to 8.4 million from April - up from last October’s 4.5 million - when Government support with rising energy bills falls, campaigners fear.

National Energy Action (NEA) said those in fuel poverty will include 1.8 million carers, 5.9 million low income and financially vulnerable households, 3.6 million people with a disability and 1.6 million households in homes without a gas supply.

A household is considered to be in fuel poverty if it needs to spend 10% or more of its income on energy in order to maintain a satisfactory heating regime.

A survey for NEA found 81% of householders say they will ration their heating over the next three months, 55% are already rationing hot water and 13% are reducing use of medical equipment.

The cap on household energy bills will increase in April, such that the average bill will rise to £3,000 per year, from £2,500.

NEA chief executive Adam Scorer warns:

“This winter has already been bleak and next year is set to be even worse.

“With Government support being reduced and energy bills spiralling yet again in April, one in three households will be in fuel poverty. That means many of them will be forced to bed wearing coats, rationing showers and hot water, it means running up huge debts or self-disconnecting and going cold.

“Millions of the most vulnerable - carers, people with disabilities, those on low incomes and living in inefficient homes - are already bearing the brunt this winter. The situation will continue to get worse next year. The effects of this are devastating on both physical and mental health. Make no mistake, cold homes can kill.

“Government intervention must prioritise the most vulnerable in 2023 and beyond.”

Ahead of our #FuelPovertyAwarenessDay tomorrow, we estimate there will be 8.4 million UK households in fuel poverty come April. https://t.co/Dm9fEaR6uY #EnergyCrisis #CostOfLivingCrisis

— National Energy Action (@NEA_UKCharity) December 1, 2022

Ofcom has launched an industry-wide investigation into whether phone and broadband firms set out in-contract price rises clearly enough before customers signed up.

The regulator is concerned consumers who took out contracts between March 1 2021 and June 16 2022 may not have been given clear enough information about in-contract price rises, which are usually applied in March or April each year.

The rules for that period stipulate firms must set out any potential future price rises in the terms of a contract prominently and transparently at the point of sale.

Ofcom has launched an industry-wide enforcement programme into whether in-contract price rises were set out clearly enough by phone and broadband companies before customers signed up...https://t.co/KxxZoZDHfq

— Matthew Howett (@howett) December 1, 2022

Derby-based brokerage firm Mortgage Advice Bureau (MAB) has issued a profits warning, telling shareholders that the housing market has suffered from the September’s mini-budget.

MAB told the City that its written business in October and November tumbled to around half of expected levels, after Kwasi Kwarteng’s package of unfunded tax cuts spooked the financial markets.

The company says:

The mini-budget on 23 September 2022 created a significantly heightened level of uncertainty which had a direct negative impact on the mortgage market, including an immediate rise in mortgage interest rates, the withdrawal of many mortgage products by lenders, a rapid tightening in underwriting and reducing availability of credit.

As a result, house purchase activity was significantly reduced and re-financing was also impacted. This situation persisted as borrowers and lenders awaited some level of reassurance and clarity from the Autumn Statement.

The company warns that profits this year will be slightly below market expectations, while profits in 2023 will be “considerably impacted”. Shares in MAB have tumbled 17%.

Trading “severely impacted” by mini-budget at MAB https://t.co/s3j9YmlYPw pic.twitter.com/zBW9zsisQT

— Insider (@insidereastmids) December 1, 2022

Peter Brodnicki, CEO of MAB, says the mortgage market was destabilised by the mini-budget:

“The consequences of the so-called mini-budget have been quick and far-reaching. Overnight our market moved from being fairly stable and reasonably confident, to almost the polar opposite.

The sudden and unexpected pace of mortgage rate increases, combined with the tightening of mortgage lending criteria, have resulted in some customers pausing both home-moving and re-financing plans.

Mortgage Advice Bureau Sees 2022 Profit Missing Views Amid Economic Turmoil - MarketWatch https://t.co/l5JwaTTLyX #PropertyNews

— Michael .E🔑🏠 (@Mike_Empirelpm) December 1, 2022

Updated

A G4S government contractor security guard .

The GMB union have warned the Bank of England that the UK could face cash shortages in the run-up to Christmas, as G4S security workers go on strike next week.

In the letter to The Bank, the GMB have asked:

  • Is G4S seeking agency staff without full CRB check and SIA licenses?

  • Has the Bank been reassured that the minimum staffing levels can be maintained?

  • Have there been assurances on holding excess cash – without which the risk of attacks on staff could increase?

More than 1,000 security workers who deliver cash and coins to some of the UK’s biggest banks and supermarkets have voted to strike on Monday 5th December. That raised the prospect of potential cash shortages in the run-up to Christmas

G4S Cash, part of Allied International, originally offered members a part pay freeze, though have now tabled an offer of 6.5%, according to the GMB.

Eamon O’Hearn, GMB National Officer, says there is a genuine risk of cash shortages:

“G4S Cash staff are low paid workers doing a dangerous job, transferring the cash so many of us still rely on every day.

“All they are asking for is a wage they can live on. Where they’re not worried about their bills or providing for their families.

“These staff provide a vital service. If they walk out, there is a real risk of cash shortages over the festive period.”

Ford plans £125m electric vehicle investment at Halewood

Ford plans to invest an extra £125m in electric vehicle parts production at its Halewood plant in a move that will make it a key part of the company’s European zero-emissions ambitions.

The factory on Merseyside will produce 420,000 electric drive units a year from 2024 under the plan, an increase from the 250,000 initially planned, Ford announced on Thursday.

The US carmaker announced the shift at Halewood from making gearboxes for petrol and diesel cars to producing the drive units, which include electric motors and power electronics, in October last year. The additional investment means Ford will spend £380m on upgrading Halewood and the van design centre in Dunton, Essex, for electric vehicles (EVs).

UK factories face a long winter, warns James Brougham, Senior Economist at Make UK, which represents manufacturers.

Following the drop in factory output last month, Brougham says:

“In the past year, demand has shielded industry from the worst of the fallout brought about by high inflation, soaring energy costs and staff shortages but this protective shield is now clearly ebbing away fast. As new orders dry up, so too does the cashflow that has allowed companies to operate in such a hostile environment. Industry knows this too, posting the worst optimism score since data were collected a decade ago.

“There is clearly a long winter ahead as those businesses that haven’t moved into a battle footing yet soon will, with investment continuing to decline as businesses repurpose planned capex towards business continuity and contingency spend.”

Wholesale gas prices are rising this morning, as the weather turns chillier.

The day-ahead UK gas contract is up 15% at 376p per therm, the highest level since mid-September.

The meteorological winter starts today.
(The astronomical one starts on Dec 21st)

From now, the European energy market faces the ~90 coldest days of the year. Brace yourself. This is not over | #OOTT #LNG #CoalTwitter #EnergyCrisis

— Javier Blas (@JavierBlas) December 1, 2022

European gas prices have also been rising:

Quietly sneaking back up... pic.twitter.com/TA8pglsRFm

— Paul McNamara (@M_PaulMcNamara) December 1, 2022

Updated

UK factories hit by 'lethal cocktail' of Brexit, logistics woes, high costs and low demand

The UK’s manufacturing downturn continued in November, as factories were hit by falling output and new orders, and cut staff at the fastest rate in two years.

The UK Manufacturing PMI report from S&P Global and CIPS found that activity continued to fall last month.

The intermediate goods sector (which makes products for use in final items) fared especially poorly, while consumer and investment goods producers also suffered a downturn.

Business sentiment dipped to its lowest level since April 2020, early in the pandemic.

And new export business contacted at the quickest pace in two and-a-half years, as demand from several trading partners – including the EU, China and the US – deteriorated.

Dr. John Glen, Chief Economist at the Chartered Institute of Procurement & Supply, explains:

“A lethal cocktail of Brexit, logistics constraints, high costs and low demand contributed to the continued decline in manufacturing output in November which also fed into deteriorating job numbers for a second month in a row.

This left the UK’s manufacturing PMI at 46.5 in November, up from 46.2 in October, but in contraction territory for the fourth month running. That’s one of the lowest readings in the last 14 years.

🇬🇧 UK manufacturers saw further contractions in output, new orders and employment in November, while business sentiment towards future activity slipped to its lowest since April 2020. On the plus side, the #PMI edged up to 46.5 from 46.2 in Oct. Read more: https://t.co/n6M7Qcb8EK pic.twitter.com/XWdtTReNpL

— S&P Global PMI™ (@SPGlobalPMI) December 1, 2022

Rob Dobson, director at S&P Global Market Intelligence, says UK manufacturers were hit by weak demand, declining export sales, high energy prices and component shortages.

“The outlook for the sector also darkened, as confidence among manufacturers fell to its lowest level since April 2020. Weak sentiment and declining intakes of new work led to job losses, a retrenchment in purchasing activity and an accumulation of finished goods inventory that will likely provide a further brake to output during the months ahead. Companies are also reporting rising recession fears, weak consumer spending and subdued client confidence.

The trend in new export business was especially weak, as Brexit issues and supply chain stresses exacerbated the effects of a weakening global economic backdrop, leading to lower sales from the US, the EU and China. On a slightly more positive note, manufacturers saw a welcome easing in input price inflation.

However, firms are still reporting that the direct and indirect impacts of high energy prices remain a major concern.”

Karen Noye, mortgage expert at Quilter, is hopeful that UK house prices will only ‘dip’, rather than crash.

Noye explains:

“Today’s Nationwide house price index shows that the lack of demand in the market, as a result of the cost of living crisis, is now taking its toll on house prices. According to the statistics, there was a 1.4% month-on-month fall, representing the biggest drop since June 2020.

“While we are far from the torrid times from early October when the fall-out from the mini budget was having a significant impact on people’s moving plans, increased mortgage rates will still be affecting some people’s plans. Instead of suffering the cost of moving during the cost-of-living crisis people are opting to batten down the hatches and ride out the cost-of-living storm.

“Those coming to the end of fixed term deals should seek help from lenders or advisers to ensure that they can find the best deal available as the market has shifted significantly and individual circumstances may dictate that other types of mortgages that have been less popular in the past, like tracker mortgages, offer better value for money than a shorter-term fix. Everyone’s circumstances are different so seeking advice is key.

“With the stamp duty cut still in play and a serious lack of stock in the market, we should experience just a dip in the housing market as we adjust to a new cost environment which should eventually ease. When it does, property prices are likely to rebound. It may therefore make sense for first time buyers to sit on their hands for the time being and wait for prices to bottom out. However, timing the market is no easy feat and it’s unwise to put life on hold if you need to move or buy.”

One in five UK families 'struggling to pay for water'

The number of householders in England and Wales who are struggling to pay their water bill has jumped by a third, regulator Ofwat reports, as the cost of living crisis hits budgets.

A fifth of British households are struggling to afford their water bills, with young people particularly vulnerable to the cost of living crisis.

Ofwat’s latest report, conducted in October, found that the proportion of customers having difficulty paying for water has risen to 20%, up from 15% in May.

Three quarters (75%) of younger people aged 18 to 34 had reported struggling to pay household bills sometimes or more often.

A fifth of British households are struggling to afford their water bills, according to regulator Ofwat, with young people particularly vulnerable to the cost of living crisis https://t.co/4YquvCvVaA

— Bloomberg UK (@BloombergUK) December 1, 2022

Ofwat is urging water companies to do everything they can to help customers struggling to pay their water bill.

Ofwat spokeswoman Claire Forbes said:

“We know from previous research that many customers are struggling with utility bills. As today’s report underlines, this financial strain is persisting and, for many, worsening.

As winter approaches, water companies must ensure they are supporting their customers and informing them of the help available. We will continue to listen to customers’ concerns, monitor how well water companies are responding and take further action where necessary.”

Updated

Eurozone manufacturing downturn continues

November was a tough month for European factories.

Activity at eurozone manufacturers fell again last month as the downturn in the sector continued, according to the latest survey of purchasing managers by S&P Global.

Their Eurozone Manufacturing PMI has come in at 47.1, up from October’s 46.4, but still below the 50-point mark showing stagnation.

Factories were hit by a drop in new orders again, with clients spooked by economic uncertainty and high selling prices.

This prompted factories to cut back on their purchases on raw materials and components.

Eurozone Manufacturing #PMI at 47.1 in Nov (Oct: 46.4) to mark the second-worst performance among #manufacturing firms since spring 2020. Weaker demand helped to soften inflationary pressures further and reduce strain on suppliers. Read more: https://t.co/CGq2HXZZ7G pic.twitter.com/1T8w9kSGa4

— S&P Global PMI™ (@SPGlobalPMI) December 1, 2022

Encouragingly, though, input cost inflation slowed – which meant manufacturers could take a ‘less aggressive’ approach to their own price rises.

🇩🇪 Germany’s Manufacturing PMI ticked up to 46.2 in November from October’s 2.5 year low of 45.1, but remained firmly in contraction territory. Expectations of future growth improved slightly as cost inflation continued to ease. Read more: https://t.co/inIqPLBAvs pic.twitter.com/36ZeRP4XSP

— S&P Global PMI™ (@SPGlobalPMI) December 1, 2022

🇫🇷 French manufacturers continued to suffer a downturn in conditions in November, although the #PMI picked up to 48.3 (Oct: 47.2) to suggest a softer decline. Latest results added to signs that inflation is heading on a downward path. Read more: https://t.co/qukCYp6gmU pic.twitter.com/O2h9x9epx3

— S&P Global PMI™ (@SPGlobalPMI) December 1, 2022

Cost of living crisis pushes up sickness

People are getting sicker owing to decades of spending cuts, “decimated” public services and the current cost-of-living crisis, doctors have warned.

A new report from the British Medical Association (BMA) said medics are struggling to cope with demand from patients whose health conditions are being made worse by poverty, poor housing, lack of heating and skipping meals.

Around half of GP appointments are taken up with often preventable, long-term conditions, while medics spend around 20% of their time dealing with issues that are “non-medical but related to social or economic pressures”.

The report warned that the UK is “facing multiple threats to its health and the Government is failing to respond”.

In the study, the BMA argued that the nation’s health was already deteriorating before Covid hit, including through a decade of austerity, widening inequalities and cuts to public services and public health. More here.

My only comments are that house prices fall when homes become less affordable to many. Prices seem more reasonable statistically, particularly when the statistics appear alone, without explanation as to why they're 'low'. This leads current statistic ...https://t.co/gRBi84cdhW

— Richard Lovell (@LovellPropguru) December 1, 2022

Hotel Chocolat Portly Penguin chocolates.

In a blow to frugal chocolate-lovers, Hotel Chocolat is cutting back on discounts this Christmas.

The British luxury chocolate maker told the City this morning that it plans to focus on full-price sales:

A focus on “quality over quantity” will target reduced levels of discounting and higher mix of full-price sales, with reduced spend on lower margin online acquisition marketing.

A majority of its Christmas gift range is priced between £2.50 and £8.50.

Hotel Chocolat posted a statutory loss of £9.4m for the year to June 26, down from a profit of £3.7m pounds a year earlier, having taken an inpairment on its joint venture in Japan.

Hotel Chocolat in the red amid ‘challenging’ current trading landscape https://t.co/W3I7oXqout pic.twitter.com/W0NrEx3HVT

— City A.M. (@CityAM) December 1, 2022

Updated

EY ITEM Club: House prices to fall 10%

The EY ITEM Club, the economic forecasters, predicts that UK house prices wil fall by around 10% over the next year to 18 months, due to rising interest rates and the weak economy.

Here’s their take on this morning’s house price figures:

  • A 1.4% month-on-month fall in Nationwide’s measure of house prices in November was larger than expected and the largest decline since June 2020. Although the tightening in mortgage market conditions following September’s mini-Budget has eased, the prognosis for house prices and housing activity remains weak.

  • Interest rates on mortgages are well above levels of only a few months ago – a situation which the EY ITEM Club thinks is unlikely to change given the prospect of further rate rises by the Bank of England. Cost of living pressures on households are pushing real incomes down and the EY ITEM Club believes the economy is probably already in recession.

  • However, the EY ITEM Club thinks markets are over-estimating how far borrowing costs will rise. The substantial savings built up by households over the last few years should also provide a cushion against the impact of higher mortgage rates. The EY ITEM Club continues to expect average property prices to fall by around 10% over the next year to 18 months.

🏠 One of the repercussions of the mini-Budget was a fall in UK mortgage approvals in October
⬇️ Approvals for new mortgages fell to 58,977 from 65,967 the previous month#EYITEM Club: https://t.co/Fd8NhnLTav

— EY ITEM Club (@EY_ITEMClub) November 29, 2022

Updated

Nationwide’s chief economist Robert Gardner has told Radio 4’s Today Programme that that activity fell quite sharply in the housing market, after mortgage rates jumped following the mini-budget.

A shocking statistic on #r4today from Nationwide’s chief economist Robert Gardener: the Truss/Kwarteng rise in interest rates increased mortgage costs from 30% to 45% of take-home pay for first time buyers. In London it rose from 50% to 75%.

That’s why house prices are falling.

— Dorje (@dorje_m) December 1, 2022

"House prices fall for the second month in a row." @samueltombs on U.K. Nationwide House Prices, November #PantheonMacro

— Pantheon Macro (@PantheonMacro) December 1, 2022

"Fiscal fiasco of the mini-budget" hits house pricess

The “fiscal fiasco” of the mini-budget helped to push house prices down in November, explains Victoria Scholar, head of investment at interactive investor:

“Nationwide’s UK November house price index grew by 4.4% year-on-year slowing from 7.2% in October and falling short of estimates for growth of 5.8%. On a monthly basis, house prices slid by -1.4% versus a drop of 0.9% in November and below forecasts for -0.3%.

This was the biggest monthly decline in June 2020 at the height of the pandemic.

The fiscal fiasco of the mini-budget which pushed mortgage rates sharply higher added to existing upward pressure on lending rates and sharply weighed on housing demand in Britain.

Macroeconomic pressures from the rising cost of living and a slowing economic trajectory are dampening demand for housing with many potential buyers opting to rent instead for now until house prices and mortgage rates come down next year. Offsetting a more painful drop in the housing market is the chronic undersupply of housing in this country, which is propping up prices.

Earlier this week, Zoopla said house prices would fall by about 5% next year while the OBR estimates house prices will fall by 9% over two years.”

UK house prices will fall for the next two years before starting to rise again, according to the government's official forecaster.
A drop of 9% is expected between now and autumn 2024, the Office for Budget Responsibility (OBR) has said.https://t.co/7PP4fHCAFF pic.twitter.com/tF237Nz3EQ

— Greg Neall (@WUYWgreg) November 21, 2022

Updated

Mortgage affordability becoming more stretched

The rise in mortgage rates has made affording a house even more of a stretch.

Nationwide points out that a hypothetical typical buyer, with a 20% deposit and borrowing four times their income, would need to be rather higher up the income stream in the south of the country, rather than the north.

Nationwide says:

“For example, in Scotland and the North of England, this typical buyer would be in the 30th income percentile, while in the South West they would be in the 80th percentile, and above the 90th percentile in London and the South East.

UK housing affordability

Some regions have seen a more pronounced deterioration in affordability in recent years than others.

Nationwide says:

In Scotland and the North region, the typical buyer is now located in the 30th percentile, compared with the 25th percentile in 2019, before the pandemic struck. Similarly, in East Anglia, East Midlands and West Midlands, the typical buyer has moved from the 60th percentile to the 70th percentile.

UK mortgage affordability

The biggest deterioration in affordability since 2019 has been in Wales, with the typical buyer now located in the 60th income percentile, compared to the 40th percentile in 2019.

Updated

November’s drop in house prices was larger than economists had expected:

Here we go…In one line: House prices fall for the second month in a row.

Nationwide’s seasonally adjusted measure of house prices fell by 1.4% month-to-month in November. Year-over-year growth dropped to 4.4%, from 7.2% in October, well below the consensus, 5.8%.

— Merryn Somerset Webb (@MerrynSW) December 1, 2022

Handelsbanken: house price correction on the way

Nationwide’s house price figures indicate that the UK housing market is now “firmly in a cooling phase”, with prices having fallen for two consecutive months, says Daniel Mahoney, UK Economist at Handelsbanken.

The jump in borrowing costs is affecting the mortgage market, he explains:

While financial market conditions have stabilised, it is clear that financial constraints on households continue to impact the mortgage market.

Bank of England money and credit data published earlier this week highlight how the rising interest rate environment is affecting the mortgage market: latest figures show net borrowing of mortgage debt down to levels last seen in November 2021, and mortgage approvals - an indication of future borrowing - fell to 59,000 in October, which was below the previous six month average.

It is unsurprising that survey evidence suggests that mortgage affordability has become the biggest factor in stopping purchases of residential property in the UK.

After a buoyant period during the pandemic, the UK property market is in for a correction but questions still remain about how exactly this will all play out into 2023, Mahoney adds:

The supply of homes coming to market is falling, but demand appears to be dropping at a faster rate meaning it seems likely that average prices will see nominal falls in 2023 and, of course, even more severe decreases in real terms due to the high inflation environment.

However, the upcoming correction is unlikely to be felt uniformly across the UK: for example, London and the South East could be hit especially hard given the above average loan to income ratios in these regions.

New: the Conservative government has tamed inflation in the housing market but few homeowners are likely to thank them for it.

House prices fell by 1.4% in November. @AskNationwide blames the impact of rising interest rates amplified by Liz Truss’s calamitous mini-budget. pic.twitter.com/YuUjhvm3JD

— Joel Hills (@ITVJoel) December 1, 2022

Potential buyers are now haggling house price down, reports north London estate agent Jeremy Leaf.

‘Prices are softening but could have fallen further were it not for those two stalwarts –shortage of supply and strong employment, despite continuing concerns over the rising cost of living and particularly mortgage repayments.

‘The problem is not existing sales, the overwhelming majority of which are proceeding, but new business. However, some buyers are returning now that mortgage rates are beginning to fall but they are more aware of their stronger position so are negotiating hard.’

Knight Frank: mini-Budget impact 'continued to reverberate in November'

The impact of the mini-Budget continued to reverberate in November, with the largest monthly fall in house prices since the early days of the pandemic, says Tom Bill, head of UK residential research at estate agent Knight Frank".

Financial markets have been reassured by new government’s economic plan but the mortgage market is playing catch up. Mortgage rates should keep edging downwards as the effects of the mini-Budget wash through the system, which should settle the nerves of buyers and sellers, even as a 13-year period of ultra-low borrowing costs comes to an end.

He predicts prices will keep falling, as higher borrowing costs hit the market:

We expect house prices to fall by 10% over the next two years and the reality of higher rates will bite more after Christmas. Mortgage offers made before the mini-Budget will begin to lapse and increase downwards pressure on prices from 2023.”

The mini budget fall out causes a knockout blow for UK house prices which fall 1.4% month-on-month making the AVG UK house now worth £263,788. This is the biggest hit to prices since June 2020, leaving growth smarting as it reduces to 4.4% in Nov from 7.2% in Oct @AskNationwide pic.twitter.com/J65tcUcPVC

— Emma Fildes (@emmafildes) December 1, 2022

Updated

Introduction: UK house prices slide 1.4% in November

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK house prices fell at the fastest pace in almost two and a half years last month, as the turmoil folllowing September’s mini-budget hit the sector.

Average house prices fell by 1.4% on a seasonally adjusted basis in November, figures just released by Nationwide building society show.

That follows a 0.9% drop in October, indicating that the housing market is cooling after strong growth since the pandemic began.

UK house price index

That’s the biggest monthly fall since June 2020, and dragged annual house price growth down to 4.4% in November, from 7.2% in October.

💥 UK house prices slide 1.4% in November from October, the biggest monthly drop since June 2020 - @AskNationwide

💥 Annual house price growth cools to 4.4% in Nov vs 7.2% in Oct.

— Andy Bruce (@BruceReuters) December 1, 2022

The average property price dropped to £263,788, from £268,282, as the surge in mortgage rates made it harder for buyers to afford a home.

UK house price index in November

Robert Gardner, Nationwide’s Chief Economist, explains that “The fallout from the mini-Budget continued to impact the market” last month.

While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum. Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.

Data from the Bank of England this week showed a sharp fall in mortgage approvals in October, after the mini-budget caused chaos in the market by driving up borrowing costs.

The market looks set to remain subdued in the coming quarters, Gardner predicted:

Inflation is set to remain high for some time and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.

“The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.

He points out, though, that longer term borrowing costs have fallen back in recent weeks and may moderate further, as investors dial down their expectations for future Bank of England interest rate rises.

On Monday, property website Zoopla reported that many home-sellers were accepting bids below their asking prices,

The agenda

  • 7am GMT: Nationwide house price index for November

  • 9am GMT: Eurozone flash manufacturing PMI for November

  • 9.30am GMT: UK flash manufacturing PMI for November

  • 10am GMT: Eurozone unemployment report

  • 1.30pm GMT: US PCE measure of inflation

  • 3pm GMT: US flash manufacturing PMI for November

Updated

Contributors

Graeme Wearden

The GuardianTramp

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