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UK Construction PMI Slows

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UK Construction PMI Slows

A softer reading in this month’s Construction Purchasing Managers Index (PMI) has not taken the spotlight off the unabated rise in British house prices. Today’s PMI reading came in at 60, slightly lower than the 60.8 experienced in April, consensus estimates were for this figure to remain at the 60.8 level again in May. Despite this metric falling back on the month it still remains at very elevated levels.

Actual house price data made available earlier this morning contains the truer picture of the rising costs of owning a home in the UK. The average price of a home in the UK is now at a new all time high of £186,512, this has today surpassed the record set just before the crises began.

The Nationwide House Price Index seasonally adjusted month on month for May is now reading at 0.7%, this is lower than the 1.2% experienced in April but higher than the 0.6% reading expected by market analysts. The more concerning statistic is the year on year version of the House Price Index, non seasonally adjusted this is now showing UK House Price growth at 11.1%, this represents an increase on last month’s annual growth rate of 10.9%, consensus estimates were for this 10.9% level to hold again in May.

There is some evidence that the rate at which house prices are growing is itself slowing. Today’s monthly reading provides some evidence towards this, as does the three monthly index also published by Nationwide, this removes some of the short term volatility and is now showing 2.3% growth over the period compared to 2.5% last month.

Effective macroprudential policy is being cited as one reason for the recent slowing of house price growth as tighter mortgage lending regulation comes into play. It is therefore likely that we will see more activity from the Bank of England’s Financial Policy Committee over the coming months.

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