Consumer confidence on the rise, according to Nationwide

Commercial property values up by +0.9% in January

Mortgage approvals for house purchases fall

Less construction businesses going into administration

January saw retail sales values drop

Consumer confidence in the UK rose in January 2010 as the economy started to exit the worse recession on record, according to the Nationwide Building Society.

The consumer confidence index went up by three points in January 2010 from 73 in December 2009, which is almost double the 39 recorded in January 2009.

Martin Gahbauer, chief economist at Nationwide, said: “ Positive signs from the manufacturing sector and labour market may have helped boost confidence during January, but confidence is likely to remain fragile for some months to come. Heavy discounting on the high street and government driven incentives such as lower VAT, the car scrappage scheme and the stamp duty holiday combined to keep the Spending Index buoyant throughout much of 2009. The removal of these initiatives may now be causing consumers to reconsider parting with their cash at a time of year when we would normally expect.”

There was an increase to 36% in the belief that the future economic and employment situation would be better in six months time, in comparison with 34% in December 2009 and just 17% in January 2009. The number of those believing there will be more jobs in the future increased by 4% in January to 29% – the highest percentage since June 2008.

Commercial property values up by +0.9% in January

In January 2010, there was an increase of +0.9% in UK commercial property values, down from the record +3.3% increase recorded in December 2009, as a widely anticipated slowdown in the rate of capital appreciation occurred following three successive months of record growth in the final quarter of 2009, according to CB Richard Ellis (CBRE).

David Wylie, head of economics and forecasting at CBRE, said: “January’s 1.5% total return marks an unsurprising moderation in the commercial property market’s recovery in what is often a quieter month in the property calendar. The breakneck pace of capital appreciation seen in the closing months of 2009 has moderated, but given the breadth and depth of investor demand currently seen in the market, total returns look set to re-accelerate in the coming months.”

The strongest performer was Central London offices with total returns of +2.2%, around half of December’s 4.3% figure. In contrast, retail warehouses showed the most significant slowing in the rate of capital growth, with total returns up by just +1.2%, their weakest monthly increase since June 2009.

All-Property rental values were down only -0.1%, a possible early indication that demand in occupier markets may be becoming more positive, whilst yields were broadly flat, remaining unchanged at 7.3% the report stated.

Mortgage approvals for house purchases fall

December 2009 was the first month since November 2008 that mortgage approvals for house purchases fell as they were down by 1,022 to 59,023 from November 2009 according to the Bank of England (BoE).

Total mortgage lending in December was £1.2bn, down from a revised figure of £1.6bn in November. Remortgaging approvals increased to 27,276 and whilst this was higher than November 2009, it was below the six-month average of 28,417.

Paul Broadhead, Building Societies Association’s (BSA) head of mortgage policy, said: “Whilst it is encouraging to see an increase in gross lending at the end of the year when activity would typically decline, we believe it is likely that this rise can be attributed to a rush from buyers keen to complete transactions before the year end in order to beat the removal of the stamp duty holiday. Despite this rise, total gross lending in 2009 was only half of that in 2008 and it is likely to remain at low levels until funding conditions improve.”

According to the BSA, gross mortgage lending by building societies increased by +15% in December 2009 to £1.8bn, compared to £1.6bn in November. Gross lending for 2009 totalled £18.6bn compared to £37.5bn in 2008.

Less construction businesses going into administration

According to the Insolvency Service, the amount of construction business failures going into administration fell in Q4 2009 by -15.1% (90 companies) compared to Q3 where 106 did.

This was a significant improvement on Q4 2008 which had a peak of 156 failures, which is a drop of -42.3%. Throughout 2009 there were 427 business failures, which is a -8.8% fall in comparison to 2008 which had 468 companies entering administration.

Phil Westerman, head of construction at Grant Thornton, said: "It is always positive to see tangible improvements in the construction sector and it is a big surprise that the figures in Q4 are not worse given the adverse weather conditions experienced in December.”

Despite house prices in Britain showing some signs of recovery and the Government's commitment to boost infrastructure, mortgage providers are still requiring a high level of deposit, from first-time-buyers in particular.

Coupled with the ongoing economic uncertainty and the impact this is having on the pipeline for future work, trading conditions for the construction sector during the first half of 2010 and beyond are expected to remain difficult.

Even though the UK has officially come out of recession, the construction sector often lags behind others in recovering from a downturn so we may therefore see an increase in business failures before things significantly improve."

January saw retail sales values drop

January 2010 saw the worst retail sales growth in 15 years after sales values dropped -0.7% compared to January 2009 when sales had risen +1.1%, according to the British Retail Consortium (BRC), therefore in total sales rose by +1.2% against a +3.2% increase in January 2009.

Despite food sales being boosted by the snowy conditions in the first week of January, once the weather improved food sales slowed and non-food picked up but not at a significant rate.

Stephen Robertson , director general of the BRC, said: “It was an awful start to the year and in stark contrast to an upbeat December. This is the worst January growth in total sales in the 15 years we’ve been running the survey. The month as a whole was significantly weaker than December.

“Most non-food sectors had a poor start, though nearly all recovered towards the end of the month. Furniture and DIY were worst hit as customers put off buying non-essentials. The VAT change brought some sales forward to December, but customers are becoming cautious again in the face of economic and political uncertainty. Retailers will be hoping these results are mainly a snow induced blip, rather than an indication of further difficulties.”

Growth in internet, mail-order and phone sales slowed to 14.6% in January 2010 from 26.5% in December 2009. As shoppers turned to purchase online as the snow prevented them from getting out, with a number of retailers reporting new users as a result. Sales continued to outpace store sales but the expansion is from a very low base, as non-food non-store sales account for only about 4% of total retail sales.

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