The pound fell against the majority of the 16 most actively traded currencies for a second consecutive day after the National Institute of Economic and Social Research (NIESR) reported that the UK’s post-recession recovery could be the weakest of any since the First World War. The NIESR estimates that the UK economy grew by just 0.5% in the three months to the end of September, only a slight improvement from the 0.4% growth seen in the three months to August.
“UK economic growth over the past year has been anaemic; the level of output is only 0.5% higher than this time last year,” the Institute added.
“The level of GDP is still 4% below its pre-recession peak, suggesting that this recovery will be the weakest of any since the end of the First World War.”
In addition, the British Chambers of Commerce (BCC) reported that a survey of 6,700 firms indicated that third quarter growth could be even weaker than in the previous three months amid “concerning signs of stagnation in the domestic economy.”
Meanwhile, figures from the Department for Local Communities and Government show that UK house prices fell by 1.3% over the year in August. Month-on-month, prices climbed by 0.6% on a seasonally adjusted basis. The average house price stood at £208,476 in August.
In other housing data, investors will note is the Royal Institution of Chartered Surveyors (better known as RICS) “housing market survey” which questions surveyors about the market. In September new instructions, which indicate supply levels, fell back with 5% more surveyors reporting supply of property fell rather than rose. In addition, 23% more surveyors reported prices fell rather than rose, this was the same level as August.
RICS housing spokesperson, Michael Newey said of the results: “Falling supply of fresh stock is indicative of general fears overhanging the economy, with many potential sellers preferring to stay put for now. As a result, the UK housing market remains pretty flat with activity level generally subdued.”
Meanwhile, the euro received a boost after the so called “Troika” inspectors (International Monetary Fund, European Commission, and European Central Bank) signalled that Greece will receive the next tranche of the first rescue plan in early November as long as the IMF and the Eurogroup give their approval.
The euro remained steady despite the news late on yesterday that voted against widening the powers of the European Financial Stability Facility to help tackle the euro zone debt crisis. Slovakia is the only country in the 17-member euro zone still to ratify the beefed up EFSF. The Slovak government also lost a confidence vote but the parliament is expected to hold a second vote on the ratification later this week.
The euro had been bolstered on Monday following talks over the weekend between German Chancellor Angela Merkel and French President Nicolas Sarkozy. The two pledged to have a “long-lasting, complete package” to tackle the ongoing debt crisis by the start of November.
The Wall Street Journal reported that the International Monetary Fund (IMF) could be preparing a €112 billion credit line for troubled countries including Spain and Italy. Last week, the IMF head of Europe, Antonio Borges, discussed the possibility of buying Spanish and Italian debt. The IMF quickly retracted the statement because it said that such action is not a part of the IMF mandate.
This new plan could be announced at the G-20 Summit that will be held in Cannes, France, on November 3 and 4.