Property Snapshot, August 2012

The ONS first estimate of Q2 12 GDP growth was -0.7% q/q. Some question the figure, but weak tax receipts support the data. Markets were unmoved, focusing instead on the eurozone. The latest UK purchasing manager indices suggest that Q3 12 is not off to a good start; composite indices are consistent with growth of -0.3% q/q.

The Bank of England added the Funding for Lending Scheme to its policy toolbox which already includes base rates, quantitative easing and the Extended Collateral Term Repo Facility. Economic stagnation is undermining the government’s fiscal austerity plan. Suggested new measures include more QE, lowering the base rate, a VAT cut and public investment. Bank nationalisations are also being discussed to stimulate lending.

Colliers View
The UK economy is stagnating. The government remains committed to ‘Plan A’, but a substantial policy shift is likely in the autumn term. Low inflation will provide flexibility.