United Kingdom (Thursday, 26th April to Friday, 27th April 2007)

26/4 Nationwide House Price Index (Apr)

The March data from the Nationwide provided further evidence that the recent increases in interest rates are starting to take their toll on the housing market. Although house prices advanced a further 0.4% last month in seasonally adjusted terms, this compares with 0.6% (downwardly revised) in February and an average over the previous six months of 0.8%. As a result, not only did the annual growth rate slip back into single figures, the quarterly average fell from 3.3% in Q4 to 2.1%. Admittedly, the March figures from the Halifax showed a monthly increase of 1.0% and an acceleration in the annual rate to 11.3%, but here too the quarterly growth rate fell from 3.8% to 3.0%. Such trends are consistent with our long held view that the housing market will experience a soft landing this year, with the annual growth rate easing to low single digits by the year-end. The consensus expects a rise of 0.6% in April.

United States (Thursday, 26th April to Friday, 27th April 2007)

In a period in which most of the economic data had been weaker than expected, last month??™s upward revision, albeit a tiny one, to the fourth quarter GDP estimate was extremely welcome. That said, we should be careful not to overstate its significance. At 2.5% compared with the previous estimate of 2.2% growth was still sub-trend. In fact this was the third successive quarter of beneath trend growth and the fourth in the last five quarters. What??™s more the upward revision was due mainly, on the domestic demand side at least, to a less pronounced deceleration in stock building ??“ reducing GDP by 1.1% instead of 1.3%. By contrast, both residential and non-residential fixed investment spending were revised down, falling 19.8% and 3.1% at annualised rates respectively. Consequently, growth in final domestic sales actually slowed more than previously reported, expanding 2.0% (2.1% previously) compared with 2.2% in Q3. Financial markets expect ??“courtesy of slower consumer demand and a large outright decline in business investment ??“ even slower growth in Q1, with 1.8% the central market expectation.