Hopes for feelgood factor get triple boost

Government hopes for a return of the "feelgood factor" received a boost yesterday thanks to evidence of a livelier housing market, a jump in retail spending and further good news on inflation.

Activity in the housing market in March was the strongest for two years, according to a survey of estate agents. Four out of five said the number of viewings and enquiries had risen by 10 per cent or more.

A separate survey showed a surge in spending on the high street, which was 7.5 per cent higher than the same month a year earlier even after adjusting for the impact of an early Easter. Official figures also showed the increase in prices charged by manufacturers at the factory gate declined to its lowest since December 1994.

The prospect of faster growth without inflation helped take shares in London to a record high last night.

The housing market is showing signs of underlying strength, according to the Royal Institute of Chartered Surveyors. In a typical comment, Robert Cormack, an estate agent in Newport, Gwent, said: "After too many false dawns this decade, we are now cautiously advising buyers and sellers that signs of improvement in the property market are staring to show."

Nearly a fifth of the estate agents reported modest house price increases, although most said prices remained flat. But many said houses still had to be realistically priced to sell.

The upbeat survey follows the Halifax building society's recent report that house prices rose for the eighth month running in March, the longest sustained increase since 1989.

The brighter news on the housing front coincided with a survey of retailers showing a much stronger trend in high street spending last month.

The amount spent on retail sales surged by 7.5 per cent in the year to March. Adjusting for Easter, which had a big impact on DIY, food and electrical sales, the year-on-year increase remained a buoyant 4.5-5.0 per cent. It was concentrated on electrical goods, household items and furniture.

Hugh Clark, trading policy director of the British Retail Consortium, said: "We are particularly encouraged to see this happen before people get the benefits of the tax cuts."

He added: "Our members are detecting a distinct improvement in consumer confidence." Lower mortgage rates would continue to help retail spending, he said.

The sparks of recovery in consumer spending have shown no signs yet of setting off higher inflation. Official figures yesterday revealed that prices charged by manufacturers at the factory gate rose 3.4 per cent in the year to March, the lowest annual increase since the end of 1994.

Beef prices at the producer level dropped 0.9 per cent in March thanks to the mad cow scare, but other meat prices jumped by 5.3 per cent, meaning prices charged by food producers climbed 1.2 per cent overall.

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