Charles Davis, Economist for the centre for economics and business research offers his expert view on the state of the UK economy in June 2009.

The latest data released recently showed reasons to be cautious about the pace at which the United Kingdom economy is recovering. Latest data from the British Retail Consortium’s showed like for like sales fell by 0.8 per cent year on year in May, following 4.6 per cent annual growth in April. The latter was largely influenced by the timing of Easter, but also showed signs that retail sales were holding up surprisingly well. However, today’s figure for May came in below consensus expectations of a 0.9 per cent increase.

House Price Growth: House Price On the Rise Again

In contrast to a weak May for retailers, the latest data from the Royal Institute of Chartered Surveyors, offers a further indication that the pace of house price declines is easing. The net balance of surveyors reporting an increase in prices rose to -44.1 in May from -58.7 in April. This surpassed expectations of an increase to -52.0. This was the largest monthly increase in the net balance since September 2003 and the highest reading on the survey since November 2007.

The mood for cautious optimism was reinforced with the RICS net balance of new buyer enquiries rising to 47.5 in May from 43.6 in April; the highest reading since August 1999. Bank of England data released last week showed that although mortgage approvals have edged up in recent months, lending to households remains at structurally lower levels. Hence, sales per chartered surveyor stood at 11.8 in May, down from 16.9 a year earlier and compared with an average 25.1 in 2007. However, in the short term there has been an increase in sales, with reported sales rising in each of the last two months and up from a record low of 9.8 seen in February and March.

Is the downturn in the Housing Market behind us?

Overall, a wide range of data is pointing to the UK housing market getting closer to its trough. With prices down around 20 per cent from peak and interest rates at record lows, interest from buyers has risen to a ten year high. However, lending remains at structurally lower levels and the weak labour market impairs the strength of the recovery. This was also reflected in the volatility of retail sales; a strong April was followed by a much weaker May. This fits with our view that the UK recovery is likely to be relatively fragile.

Better Money Advice - Bringing you the best money saving deals on 2-4-1 restaurant vouchers, plus the best money advice. Best Loan Deals, Best Insurance Deals, Credit Card Deals & more Money Saving Deals Online- Bettermoneyadvice.co.uk.

Not what you are looking for? Search Better Money Advice for the Latest Money Saving Deals & News