These charts show what's driving the UK recovery
The UK economy looks as safe as houses.
The UK economy looks as safe as houses.
Growth in the UK's gross domestic product was confirmed at a robust 0.7 per cent for the third quarter, cementing the country's status as one of the fastest growing advanced economies.
But much of the rebound can be pinned on high house prices and the willingness of consumers to dig into their savings to go shopping as the increased value of equity in their homes makes them feel richer.
As the first chart below from the Office of National Statistics shows, construction activity grew at double the rate of services in the third quarter, while manufacturing and production lagged. The services sector growth was marked by an increase in architectural and engineering output as the commercial real estate sector also did well.
UK house prices have grown at an annual rate of 8 per cent or more for the last 12 months, according to Nationwide (see second chart). This has pushed up land values and benefited the property developers who hire engineers and architects.
Meanwhile, household incomes fell 0.1 per cent in the third quarter from the second, and the savings ratio fell to 7 per cent from 7.5 per cent, as the third chart shows.
Household final consumption expenditure rose by 0.9% in Q3 2014 and has grown for thirteen consecutive quarters, with purchases of durable goods such as cars and washing machines increasing, as shown in the fourth chart.
The latest data signal, however, that a rate rise by the Bank of England could put an end to what has been talked of as a strong and sustainable recovery.
Meanwhile, since the June-September period, housebuilders
have been warning that the UK is returning to a more normal market as the house price rally
runs out of steam.
As safe as houses, indeed.
http://www.ft.com/intl/fastft/255131