Retail gloom overshadows housing gains

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The Independent Online

The schizophrenic nature of the UK economic recovery was exposed yesterday by figures showing a surge in house prices and factory orders but a fall in retail sales and shopper numbers that pointed to another dire Christmas for the high street.

House prices posted their sharpest increase in 15 months in October, Nationwide building society said. The 1.3 per cent rise pushed up the annual rate for the first time since June last year, from 1.8 per cent in September to 3.3 per cent last month.

Nationwide said the spike was probably a delayed reaction to the Bank of England's cut in interest rates in August. The survey comes after a string of data from estate agents and mortgage lenders pointing to an upturn in the market.

Nationwide said it was too early to judge that prices were on an upward trend. Fionnuala Earley, its economist, said: "We think it is far too early to say that ... prices will continue to accelerate from here." She said house prices remained unaffordably high, the economic outlook "uncertain" and the threat of rising interest rates would dampen confidence.

Most analysts agreed the data pointed to a stabilisation rather than a boom, but said it would be enough to prevent the Bank from cutting rates again. "The data will have strengthened the resolve of the Monetary Policy Committee to hold policy steady next week," Simon Rubinsohn, at the stockbrokers Gerrard, said.

There was further ammunition for the hawks on the MPC from a snapshot survey of manufacturing that showed output hit its highest level so far this year. A survey by the Chartered Institute of Purchasing and Supply showed that growth in output and export orders accelerated in October.

But retailers suffered an eighth successive monthly fall in sales, according to a survey of retailers with a combined total of 20,000 stores. The number of retailers reporting a fall in sales compared with a year ago outnumbered those reporting a rise by 18 per cent.

Meanwhile, a report by SPSL, the retail traffic analysts, said the volume of visitors to the UK's main retail centres slid to its lowest level for at least seven years.