The overview from Bank of England’s Q1 Inflation Report is that Annual output growth has eased slightly compared to the same time last year and the theme of uncertainty continues, notwithstanding the outcome of the upcoming EU referendum.
Following the introduction of the National Living Wage, labour cost growth has edged higher. Restaurants and cinemas have shown robust growth and apparently leisure spending may have been boosted by reduced overseas tourism, however, manufacturing output is similar to a year ago. Although the recent depreciation of sterling has started to benefit some companies, such as food manufacturers, price inflation has remained negative for goods.
Patterns in housing market activity showed the effects of the rise in Stamp Duty on additional properties, and possibly the planned reduction of tax relief on BTL mortgage interest payments from April 2017, as buy-to-let transactions were brought ahead of changes. Growth rates in construction might be beginning to reflect skill shortages, and planning issues, as demand growth remained strong but output edged lower. This also reflects thoughts in the market place about the shortage of newly-built and secondary market housing supply, including alternative homes sought by older homeowners and affordability constraints, which have increased the age of first home owners and pushed down transactions. Adding to the complications of financing building, some in the market place have seen a tendency for surveyors’ valuations to lag market values, with SME firms remaining a smaller proportion of the construction market than pre-crisis levels.
