Good news - house prices, shares and exports on the rise.

Spring is in the air, and there's a spring in the markets too. Has the recession bottomed out?

by
Last Updated: 31 Aug 2010

Nationwide, the UK’s largest Building Society, has reported a surprise upturn in house prices of nearly one percent in February. That’s the fist time prices have risen in 16 months. Coming on the back of the news earlier this week that mortgage approvals rose by 19% in the same month, some commentators are seeing light at the end of the property crash tunnel.

Nor is this the only bit of economic cheer to have come our way recently. The FTSE was up over 4,000 this morning for the first time in weeks, and the weakness of the pound finally seems to be having its expected beneficial effect on our manufacturing exports. The CIPS/Markit Purchasing Managers Index of manufacturing activity (sounds terribly dull we know, but stick with it) was up to 39.1 from last month’s dismal 35. That’s its highest level since last October, and a much better result than expected. Although activity is still falling – any figure below 50 indicates a drop – at least things are moving in the right direction now. Separate figures also suggested that manufacturers' profitability is showing a modest rise too.

Strong performance by banking shares plus the general optimism that the G20 conference will boost confidence have played a part in the FTSE’s rise today.

It also emerged that Britons are paying off their debts at a record rate, clearing £8bn of mortgage debt in the last quarter of 2008. That’s the biggest net injection of equity since records began way back in 1970. Perhaps we are learning to live within our means once again – although there is still a huge chunk of unsecured lending to tackle as well.

But does all this mean that the recession is over? Sorry but almost certainly not. House prices traditionally bounce in spring, when people emerge from their winter cocoons and start to get itchy feet again. Even if the big drops in value have happened – and there is still debate over that – we can expect to see quite a few more monthly ups and downs before the market can truly be said to have turned a corner.

Any good news is of course very welcome at present, but we must be careful not to read too much into it. The recovery when it does come will likely be slow, erratic and painful. These figures are encouraging, but they do not indicate the end, or even the beginning of the end. They might just, with a bit of luck and a following wind, be a sign of the end of the beginning.

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