ECONOMIC NEWS: 11 MAY 2015
In April, The Office for National Statistics (ONS) revealed that economic growth for the three months to the end of March 2015 was 0.3 per cent, largely due to a fall of 1.6 per cent in construction output. Some blame for the slump in construction was laid at the door of the then impending general election, which may have resulted in the delay of spending decisions and commitment to building projects.
The Markit/CIPS UK Construction Purchasing Managers’ Index for April also reported a fall in the pace of construction growth, including in the residential building sub-sector, which has driven industry-wide growth for the past two years. Nevertheless, the survey concluded that the construction industry was still seeing ‘solid overall expansion’. Similar Markit surveys for other sectors of the economy in April suggested growth in manufacturing had slowed, while the services sector saw its fastest growth in eight months. Taken together, the Markit chief economist, Chris Williamson, believes the surveys suggest that ‘the economy is showing robust growth momentum, expanding at a rate of 0.8 per cent at the start of the second quarter’.
In the wake of its general election win, the Conservative party is expected to pursue its main pledges with respect to housing. This will include the new Help to Buy ISA’s for first-time buyers as announced in the Budget, which came on top of the Help to Buy scheme launched in 2013. In the run up to the election, the Prime Minister promised that if the Conservatives stayed in power, the Help to Buy scheme would be extended until 2020 and provide 200,000 new homes for first-time buyers under 40 at a 20 per cent discount. Other policy intentions include the creation of a £1 billion brown field regeneration fund to unlock sites for 400,000 homes, and extending the ‘Right to Buy’ to 1.3 million housing association homes in England.
The Bank of England’s Monetary Policy Committee, which met on the 7th and 8th of May during the course of the general election, voted to maintain the Bank Rate at 0.5 per cent and the bond-buying stimulus programme at the £375bn already spent. It also agreed to publish an open letter to the Chancellor of the Exchequer concerning the release of data for the March Consumer Prices Index (CPI) of zero per cent. The largest downward contributions to the inflation rate were falls in the prices of clothing and gas, although these were offset by a rise in the price of motor fuels and by smaller upward contributions from a variety of other products such as food.