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UK Productivity & Prices Paint Bleak Recovery Picture

By Mihaela Lica Butler | January 4, 2013
  • House prices in the UK declined further last month according to the Nationwide Building Society. Predicting further price falls, the agency reported the average cost of a home there slipping 0.1 percent to  £162,262. Britain's house prices declined last month and may fall "modestly" this year, because of a weak economic recovery, Nationwide Building Society said.

    Snowman Snowdog
    It may take a flying Snowman and Snow Dog to save the UK economy

    The average cost of a home slipped 0.1 per cent to £162,262 (HK$2.05 million), the lender said yesterday. From a year earlier, values fell 1 per cent. Robert Gardner, Chief Economist at Nationwide, offered this via their press:

    "The outlook remains uncertain. With the economic recovery expected to remain fairly weak, the housing market is likely to be characterized by low levels of activity again in 2013, with prices remaining flat or modestly lower."

    Tight credit and low productivity as reported by the Bank of England (PDF), factor into a Britain recovery stagnated. Even the relative lack of supply of homes has not propped up prices well enough to conceal what experts suggest is a much bigger underlying problem. The report goes on to reveal 11 of 13 regions in the UK seeing price falls in 2012, with Northern Ireland leading all declining markets.

    The real worry where UK productivity is concerned is that the crisis, and ensuing ongoing low productivity numbers, may be indicative of an economy damaged to the point where supply cannot support growth. In such scenarios, inflation stands to further stifle any hope of complete recovery.

    In the chart below from VOX, it's clear that while the US and Spain show a typical recovery attitude where productivity after a recession is concerned, Britain and some others seem to flatline.

    Recovery Productivity
    Courtesy VOX

    Photo credit: Snowman & Snow Dog banner - courtesy Nationwide Building Society Facebook.

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