Eurozone crisis live: UK manufacturing shrinks at fastest rate in three years

Shocking fall in the U.S. and the U.K. Manufacturing PMI, France and Italy increase the pressure on Germany to defend the euro, U.S. Treasury Secretary Geithner backs action from EU leaders, markets eye the upcoming Federal Open Markets Committee and the European Central Bank decisions…


Powered by article titled “Eurozone crisis live: UK manufacturing shrinks at fastest rate in three years” was written by Dan Milmo and Nick Fletcher, for on Wednesday 1st August 2012 06.57 UTC


The weaker than expected US manufacturing data will probably not be enough to push the US Federal Reserve into further quantitative easing just yet, said James Knightley at ING:

This is the second consecutive sub-50 reading for the ISM, something that hasn’t happened since the economy was emerging from recession in the first half of 2009. It is important to remember that although 50 is the break even level for the ISM index, a figure in excess of 42.6 generally indicates an expansion of the US economy. Indeed, the current level of the ISM is historically consistent with US GDP growth of around 1%.

The detail shows modest increases in production and new order indices (although the latter is still contracting) while employment dropped to 52.0 from 56.6 and the export index continues to drop sharply.

Together with the reasonably ADP employment figure, released earlier, it still seems consistent with the Federal Reserve being on hold today, but the general weakness prompting another round of QE at the September FOMC meeting.


US manufacturing disappoints with flat reading in July

US manufacturing was flat in July, disappointing hopes of an increased. According to the Institute for Supply Management, the PMI index has come in at 49.8, compared to 49.7 in June and forecasts of 50.2. This is the second month in a row the manufacturing sector has shrunk (a reading below 50 indicates contraction).

So it’s a full house for disappointing data – China, UK, eurozone, and now, US.


Italian prime minister Mario Monti says that he and his Finnish counterpart Jyrki Katainen agreed on a dual approach to the crisis. More from Graeme at the press conference:

Monti said: “We must have relentless efforts on our respective homeworks, and at the same time there have to be european solutions

Asked what he hopes to hear from the European Central Bank tomorrow, he said:

“I believe the statement of the president of the ECB of last week was interesting, bold and appropriate, and I was in particular impressed by the clarity at which the president said excessive difference between interest rates undermine the transmission of monetary policy.”

In other words, a signal that Monti would very much welcome a new round of bond buying by the ECB tomorrow.


After the US jobs numbers and ahead of the ISM manufacturing survey and the Fed, Wall Street has opened higher.

The Dow Jones Industrial Average is up 49 points ore 0.38% in early trading.


Ahead of the US Federal Reserve meeting, there is some focus on today’s American data, with investors seeking clues as to what the Fed might do.

Private employers added 163,000 jobs in July, better than the 120,000 expected. Of course the jobs figure that really moves the markets is the non-farm payrolls on Friday, where economists expect a 100,000 rise. But these have tended to surprise the market recently, so it’s all up for grabs.

The Fed will have an idea of the non-farms at its meeting today, and will take this into account when deciding whether to launch further quantitative easing or not.

The July manufacturing survey, due shortly, should also give some guidance to the Fed’s mood. Michael Hewson at CMC Markets said;

No action this evening seems most likely which will then push the speculation about further QE to Jackson Hole at the end of August, and then the September meeting, with careful scrutiny of each economic data point, as the “will they, won’t they” speculation continues right up to November election day.


Thanks for your contributions today – particularly on house prices – and I will now hand over to my colleague Nick Fletcher. Cheers, Dan


Shades of Merkel from Finland’s Katainen. Graeme tweets that the Finns, who have been vocal with their concerns about eurozone bailouts, want universal application of the rules. Take your medicine.


Finnish and Italian leaders speak

Here is Graeme’s first posting from the Helsinki press conference:

The press conference between Finland’s prime minister Jyrki Katainen, and Italy’s Mario Monti, has begun.

Katainen begins by explaining that he has had an ‘extraordinary meeting’ with Monti, discussing how the two leaders’ citizens view the crisis (which he called the ‘mental view).

Katainen explains that many Finns are unhappy because they joined the eurozone because it has rules, only to find later that those rules were not followed by everyone.

He adds: “Some people in Finland have lost their jobs, not because of the situation in Finland, but because of the eurocrisis”.

Katainen adds that bond yields in some counries are too high
because markets have not given full recognition to the progress made already, or will be made in future.


Over in Helsinki, prime ministers Matio Monti and Jyrki Katainen have
been discussing the crisis.

Graeme Wearden is there, and reports that the two leaders are just
finishing their coffee (not a bad lunch, then).

A press conference will kick off in a few minutes. It’s the most
beautiful setting I’ve been too, at Katainen’s summer residence, called Kesäranta – which overlooks a bay on the northwest of the City. Plenty of journalists crammed into a small marquee — whole thing feels a bit like a wedding…


The UK manufacturing numbers have stuck a pin in hopes of a swift recovery from our double-dip recession and Next, the retailer, has also hinted that the Olympics won’t pull us out of a downturn either.


Boss leader

A shout out to all Bruce Springsteen fans here from Australia’s treasurer and deputy prime minister, Wayne Swan. He has said that the Boss’s social conscience, and the music it has produced, has in turn inspired him in his battle against mining tycoons who oppose his tax reforms. Swan adds that he listens to “Born to Run” after delivering budget plans to parliament. Prime minister Julia Gillard is also a fan, he says.

In a speech today he says:

If I could distil the relevance of Bruce Springsteen’s music to Australia, it would be this: Don’t let what has happened to the American economy happen here. Don’t let Australia become a Down Under version of New Jersey, where the people and communities whose skills are no longer in demand get thrown on the scrap heap of life.

The Conservative opposition spokesman, Joe Hockey, is evidently a Phil Collins fan. Here is his response to Swan:


Any suggestions of Bruce Springsteen songs that George Osborne should be putting on his iPod?


Chinese manufacturing slows

Outside of the eurozone, there are weak manufacturing numbers from China too. The state-affiliated China Federation of Logistics and Purchasing said its PMI fell to 50.1 in July, the slowest growth in eight months and just above the 50 level that signifies growth and general economic good vibes. Just.


Doom with a view

Europe is suffering economic shockwaves but, as Graeme Wearden reports from Helsinki, discussions to counter them are taking place amid mill-pond calm…


Some might argue that Nomura is understating things


Will the Fed launch QE3 in the US this evening?

The US equivalent of our Monetary Policy Committee, the Federal Open Market Committee, is due to make its monthly policy statement this evening after European markets close. The Bank of England and European Central Bank will make statements tomorrow. The ongoing deterioration in the eurozone has given rise to hopes that the Federal Reserve will announce a third round of quantative easing – entering the bond markets to buy US central government bonds off financial institutions in the hope that they will plough the proceeds back into the US economy. But the view from the City today appears to be that the Fed will hold off for now.

Gavan Nolan, director of credit research at Markit, a financial data provider, writes:

It would be a surprise if the Fed decided to launch QE3 at this stage; further deterioration in key economic indicators is probably necessary before action is taken. But given the turmoil in the eurozone the Fed could make its language more dovish.

Deutsche Bank Securities, citing the thoughts of chief economist Peter Hooper, agrees that the Fed will keep its powder dry. Note the phrase “verbal easing”, meaning Fed hints that QE will come in September instead:

DB’s Peter Hooper thinks that whilst recent US data has been disappointing it is still mixed enough for the Fed to refrain from any major announcement today. Given that this meeting sees no press conference or forecast update, the September meeting would perhaps be the better place to announce any further easing (both verbal and quantitative) if labour and activity data in the coming weeks continues to disappoint. Peter thinks that if we do get some form of policy change today, verbal easing is the most likely option with the extension of their “low rates for longer” into at least 2015. On balance though it looks like the Fed is still in “wait-and-see” mode.

Analysts at RANsquawk agree with the above and warn of market disappointment. They add:

In terms of market reaction, if the Fed keeps their cautious approach there would likely be disappointment in the equity markets and spot Gold, with possible declines across various asset classes.


Midday summary

Here’s a midday roundup on the news front:

UK downturn appears to worsen as manufacturing slumps in June

Eurozone manufacturing slumps too

US treasury secretary Tim Geithner urges Europe to act

House prices in sharpest fall since 2009

Bundesbank boss warns on enhanced powers for ECB


One siren voice – among many to consider – is that a Chinese slowdown could affect premium car exports. This is worth bearing in mind, because the likes of Bentley, Jaguar Land Rover and Mini are all based in the UK and are doing very well in China. This morning’s poor manufacturing numbers will inevitably trigger fears that car exports to emerging countries might wobble. However, BMW’s figures this morning provide an optimistic counterpoint. The German car maker’s finance boss says he sees Chinese sales growing by up to 25% this year.


ECB could be given power to close banks

Reuters is reporting that the European Central Bank’s banking watchdog could be given the power to shut down struggling banks. An unspecified “EU official” told Reuters that the plans involved giving the ECB the remit to police more than just the eurozone’s top 25 banks.

None of the problems we had in the past related to the top 25 banks. The scope should be all banks. The smaller the bank, the more decisions will take place at a local level.

The framework for a a beefed-up banking watchdog would be a key element of any move towards an EU or eurozone banking union.


Former Bundesbank boss warns on euro

Ian Traynor has sent us an update on the Bundesbank and the bank’s excellent idea of marking its 55th anniversary by issuing a spiky interview with its head, Jens Weidmann. His predecessor, Helmut Schlesinger, also chipped in and offered some sceptical observations on the euro’s longevity. Happy birthday.

Traynor writes:

Helmut Schlesinger, Buba chief at the time of the Maastricht Treaty in 1992 creating the euro, sheds some light on the twists and turns accompanying the single currency’s birth. He admits he was gobsmacked by the decision by political leaders to launch the currency in 1999 and sounds sceptical about its survival prospects.

“This was a clear defeat for us. There is no other way of putting it. We had assumed that the treaty would be concluded with a definition of the entry criteria, but without a fixed date being set…It is actually hard to envisage how a loss of monetary sovereignty could be achieved in the absence of a unified state.”

Schlesinger reminisces about the events leading up to Black Wednesday in September 1992 when Britain ignominiously fell out of the Exchange Rate Mechanism and George Soros made a killing by shortselling sterling. Schlesinger blames the politicians for sidelining the central bankers while acknowledging the inherent frictions deriving from German
tighter monetary policy – demanded by the impact of unification – being at total variance of the needs of other countries. Tempers frayed and Tory chancellor, Norman Lamont, personaly insisted that Schlesinger intervene to cut interest rates.

“The finance ministers seemed not to be listening. During the
decisive negotiations, the central bankers were seated at the
margins,” recalls Schlesinger. “Norman Lamont, the UK Chancellor of the Exchequer and chairman of the Ecofin Council, then tried to force Germany to lower its interest rates. He demanded that I personally – not the Central Bank Council – lower interest rates that following Monday. I then had to explain to him, first, that it was not possible, and second, we would not do that anyway.”


Nouriel Roubini, the US economist who saw all of this coming a while ago now (previous decade), says we need more quantative easing – where central banks buy up sovereign debt.


Greece talks “on a knife’s edge”

News in from Greece where our correspondent Helena Smith says marathon talks continue over efforts to find €11.5 bn (£9bn) in spending cuts – a condition of a further injection of EU-IMF rescue funds for the debt-crippled country. Another crunch meeting has been announced for 5pm (local time) between the three party heads participating in the governing coalition, led by the centre-right New Democracy party and prime minister Antonis Samaras.

Helena writes:

Coming up with an austerity package that will convince international creditors that Greece means business without offending a populace already reeling from cuts, has become a hire-wire act for the Greek government. As the authoritative Ta Nea newspaper put it this morning, the three leaders “have their backs against the wall.” Hand-wringing over the measures – which all agree are vital if the near-bankrupt country is to be kept afloat — reflects the huge sensitivity of inflicting yet more belt-tightening on a nation experiencing a fifth straight year of recession amid record levels of joblessness and poverty. “The three leaders will face a critical test of unity during their scheduled meeting this afternoon,” Ta Nea opined from its front page. “Important differences” between the prime minister’s office and the finance ministry and the two leftist parties supporting the conservative-led administration had surfaced, the paper said. The signs of discord were such that the fragile coalition’s “cohesion is hanging by a thread,” it reported.

She adds:

Greek coffers are drying up fast with the deputy finance ministry Christos Staikouras describing the situation as being “on a knife’s edge.”
But the government also knows that the backlash will be hard. The far-left main opposition Syriza party has issued an excoriating statement saying today that with its policies the coalition is “leading Greece back to the drachma and bankruptcy.”
Syriza added: “The three political leaders are trying to hide behind each other and altogether they are trying to hide from the Greek people. They have already agreed on the harsh new measures and are simply orchestrating how they will present them.”


Bundesbank risks row with ECB

Ian Traynor, our Europe editor, reports on a looming clash between the head of Germany’s Bundesbank, Jens Weidmann, and his European Central Bank counterpart, Mario Draghi. Weidmann has pushed the diplomatic boundaries in an interview this morning, Traynor writes:

Jens Weidmann, the head of the Bundesbank, has put himself on a collision course with ECB chief Mario Draghi ahead of tomorrow’s crucial ECB governing council meeting which has generated expecations that Draghi could unveil a massive intervention to slash Spanish and Italian borrowing costs.

In an interview issued by the Buba to mark the 55th anniversary of its founding today, Weidmann robustly has a go at the French, the British, the Americans, and indirectly at Draghi, while also oozing scepticism about plans for a new eurozone banking supervisory regime leading to a political union – policies publicly advocated by the German government.

The ECB’s independence means it has to “ respect and not overstep its own mandate…What is politically desirable and what is economically prudent have often not matched up. Whether we’re talking about interest rates or some sort of non-standard measures, in the end it always comes down to the central bank being instrumentalised for fiscal policy objectives. However, policymakers thereby overestimate the central bank’s possibilities and expect too much of it by assuming that it can be used not only for price stability, but also for promoting growth, reducing unemployment and stabilising the banking system. This pattern occurs again and again; this time it is perhaps even more pronounced than in the past.”

Weidmann last week took issue with Draghi’s statement in London that the ECB would do anything to save the euro and the two men are to meet tomorrow for what the Frankfurter Allgemeine Zeitung describes as “an exchange of ideas over a cup of coffee.”
Weidmann says that “some” in the UK and the US have been urging a more relaxed attitude to inflation in Germany to help the eurozone’s weakest. “Germany does not have to accept inflation rates which broadly unmoor inflation expectations,” he declares. Similarly, arguments about
weakening German competitiveness to help others are “absurd.”

Weidmann points out that Paris and Berlin have always taken
strikingly different positions on the roles of central banks,
stressing that the culture clash is as strong today as ever it was. “Two very different world views were colliding. They have continued to do so in all political debates – essentially, up to the present day.”

That would suggest little meeting of minds on the way ahead which is supposed to entail greater centralised eurozone control of fiscal and economic policy in return for mutualisation of eurozone liabilities. Weidmann sounds very sceptical.

“Seeing how reluctant some countries are to relinquish their fiscal policy autonomy – even in return for financial assistance – it is hard to imagine political union being achieved in the foreseeable future.”


Weak economic data from the US: lending to small US businesses fell in June to the lowest level since last October, according to the Thomson Reuters/PayNet Small Business Lending Index, which fell to 98.5 compared with 103.8 the month before.

Paynet’s founder, Bill Phelan, said it pointed to an ongoing slowdown in the US economy, whose annual growth rate of 1.5% in the second quarter was slower than in the first three months of 2012:

Small businesses really took a dive. What this means is, the slowdown is going to continue.


Car sales in southern Europe are a problem for automotive groups, particularly those that produce the smaller cars that sell well in that part of the continent. Here is an update on the Spanish market – doesn’t bode well for the Spanish economy, or any car makers with export links to the Eurozone’s fourth largest economy.


More economist reaction

More reaction on the UK manufacturing data for July, which showed a dire PMI of 45.4 compared with a downwardly revised 48.4 for June.

Ross Walker at Royal Bank of Scotland writes:

They are a shocking set of numbers. It’s a huge fall. We’d seen a more modest decline in the euro area flash [PMI estimate], but now we have a huge drop, which brings the [UK's level] more in line with the euro area.

Victoria Clarke at Investec writes:

We suspect that the Bank of England will not react directly. They will certainly be a bit spooked by these figures. But they knew that manufacturing was weak. They will look ahead now. We expect more QE [quantative easing] in November. We don’t think they will cut rates.

Jens Larsen at RBC senses chill winds from the global economy:

It is consistent with a very sharp slowing in the global economy. This is the most internationally exposed part of the UK economy and this is where you will first see a slowdown.


Finns on the defensive

My colleague Graeme Wearden is in Helsinki today, where Italian prime
minister Mario Monti is meeting Finnish counterpart Jyrki Katainen
today. A press conference is scheduled for 1.30pm BST (3.30pm local

Graeme writes:

Morning all! Monti’s visit comes seven years after Silvio Berlusconi outraged Finland by complaining about the food. His derogatory comments about smoked reindeer (not as nice as Parma ham, apparently) and a cheap crack about smoked herring caused a diplomatic incident in June 2005.

Berlusconi’s gaffe was quite upsetting for a country that cares deeply about what others think of it, according to Professor Vesa Puttonen of the Aalto University School of Economics.

“It was not diplomatic, but perhaps there was much truth in what he said. It really hit Finns … now we are wondering what Monti will say.”

Professor Puttonon believes Monti will use his visit to reassure Finland that Italy is making economic reforms. The visit comes as Finland still basks in the pride of being the only eurozone member which Moody’s gives a AAA credit rating with a stable outlook.

The Italian PM has set the scene for his meeting with Katainen by giving an interview to the Helsingin Sanomat newspaper, and warned Italy may need a “breathing break” from its current high borrowing costs. That suggests he’ll push the Finns to support any new measures taken by the European Central Bank when it meets tomorrow.

Monti insisted, though, that Italy will not require a rescue package.
That may not be enough to persuade the Finns, as some of the people I’ve met in Helsinki fear that both Spain and Italy will soon need help.


Economist reaction

ING’s James Knightley says the manufacturing PMI increases the pressure on the European Central Bank to do something, rather than the Bank of England – which is also meeting this week. ECB action will boost confidence, he adds:

We don’t think it really alters the outlook for tomorrow’s Bank of England policy meeting. They only just announced another round of quantitative easing while the long heralded Funding for Lending Scheme (FLS) only starts today. This has the potential to increase both the amount of lending going on in the UK while also lowering the cost of borrowing for households and small businesses by making it more profitable for the banks through its structure. Consequently, the BoE believe it to be a more effective policy action than another rate cut, which has its draw backs. With confidence being a major drag on activity, action from the ECB tomorrow would be far more effective than anything extra the Bank of England can come up with.


Twitter reaction

Some twitter reaction to the manufacturing PMIs, from the Telegraph’s Jeremy Warner and Duncan Weldon at the TUC. As the latter says, we shouldn’t put this down to monarchs and meteorology.


Here is the market reaction to the manufacturing numbers from my colleague Nick Fletcher, our markets expert. He writes:

The FTSE 100 lost much of its gains following the UK manufacturing data. The leading index was up around 25 points before the figures, but fell back to a 13.65 gain to 5648.93 as traders absorbed the surprise decline. The pound fell to a session low against the dollar of $1.5652 from $1.5680 beforehand, and the euro rose from 78.6p to 78.65p.


UK manufacturing slumps

Following on from the Eurozone numbers, the July manufacturing figures for the UK are out and they are poor, at 45.4 for July compared with 48.4 in June. The June number was revised down from 51.9, which had at least signified growth.

My colleague Josephine Moulds has sent us a first look. She writes:

The manufacturing sector shrank at its fastest rate in more than three
years in July, another dismal sign for the UK still languishing in a
double-dip recession.
The Markit/CIPS UK manufacturing PMI for July came in at 45.4, the
lowest reading since May 2009. That is much lower than expectations of
a reading of 48.6 and last month’s reading of 48.4. Any number below
50 signals a contraction in the manufacturing sector.
The PMI summarises the opinions of purchasing managers, who are tasked
with gauging future demand, and adjusting orders for materials
accordingly. A dramatically lower PMI means orders for materials are
down significantly so the outlook for the economy is much worse than
previously feared.
The output index had an even bigger drop, down at 43.3, compared with
June’s reading of 51.9. The only glimmer of hope in the numbers came
from the employment index, which showed the first jobs growth since

We’ll have analyst reaction on those disastrous numbers as it comes in.


Reaction to euro PMIs

Reaction to the European PMI data this morning from Howard Archer at IHS Global Insight. Worth noting his point on “relatively muted global growth”. If the UK and Europe are going to export themselves out of trouble, it requires a vibrant US, Brazil, China and India to buy what we’re making.

The July Eurozone manufacturing purchasing managers’ survey is hugely disappointing and suggests that the single currency area is headed for further marked GDP contraction in the third quarter after a highly probable drop in the second quarter (which we estimate to be around 0.3% quarter-on-quarter).

Eurozone manufacturers are clearly finding life extremely difficult amid very challenging conditions. Domestic demand is being handicapped by tighter fiscal policy in many Eurozone countries, limited consumer purchasing power, and rising unemployment. Reinforcing manufacturers’ problems relatively muted global growth is capping foreign demand for Eurozone goods.

Meanwhile, ongoing heightened problems in Greece, Spain and, to a lesser extent, Italy are magnifying the problems by weighing down on already weak and fragile business and consumer confidence and adding to uncertainty about the outlook. This is clearly resulting in some orders for the manufacturing sector being delayed or cancelled. At least though Eurozone manufacturers are being helped by reduced input prices and from the boost to their competitiveness coming from the weakened euro.


Good point from Sony Kapoor at financial thinktank Re-Define. If a PMI below 50 signifies contraction, we are far off even contemplating growth.


Eurozone manufacturing PMI has hit a 37-month low, reaching 44 for July, just undershooting estimates.


Here is an interesting chart, via a Markit tweet, of where European PMI is heading. It’s not quite the dog days of 2008, but it’s in the same direction.


Germany next and it’s not good. BMW posted decent figures this morning but its manufacturing peers are not doing so well. German manufacturing PMI is lower than expected at 43. Markit puts it in worrying context.


France’s manufacturing activity update deepens the gloom – it’s a 38-month low of 43.4.


Spain/Italy PMIs

The Spanish and Italian manufacturing activity numbers are out and, unsurprisingly, they remain poor. Remember that anything below 50 signifies economic contraction. Italian manufacturing activity contracted for the 12th month running in July, at 44.3, down from 44.6 in June. Spain’s figures showed a month-on-month improvement, but that is straw-clutching stuff. Its PMI was 42.3, compared with 41.1 in June.


Investors will be focusing on European manufacturing numbers this morning, in the wake of yesterday’s poor unemployment numbers, which showed that the number of jobless people across the eurozone rose by 123,000 in June, taking the total to 17.8 million.

According to Michael Hewson, senior market analyst at CMC Markets:

This time the data in question is the final manufacturing PMI data for July from across Europe, with all readings expected to come in below the 45 level. Spanish and Italian PMI are expected to come in the worst with the last reading of Spanish PMI coming in at 41.1 while Italian PMI is expected to slip further from 44.6 to 44.1.
French, German and Eurozone manufacturing PMI’s are expected to remain unchanged at 43.6, 43.3 and 44.1 respectively; highlighting perfectly the problems Europe is buckling under. No growth and rising unemployment are a toxic mix, which irrespective of what happens tomorrow at the ECB rate meeting is the key issue facing European leaders whether they want to admit it or not.


The FTSE has brushed off the house price data from Nationwide, which showed the biggest year-on-year drop in three years. In early trading it is up 25 points at 5660.58.


Ed Conway on house prices

Interesting from Sky’s Ed Conway on the Nationwide news. If you’re not Spanish, Dutch or American.


Market reaction

If Tim Geithner, the US treasury secretary, appears to lack optimism ahead of the ECB meeting, at least European investors seem more chipper. The FTSEurofirst 300 index of top European shares was up 0.2% at 1,065.85 points.

However, market watchers said Mario Draghi, the ECB president, needs to act decisively at the bank’s meeting this week. The wishlist includes restarting a bond buying programme in order to lower borrowing costs for the Spanish and Italian governments.

“Draghi’s credibility is really on the line this time, and the central bank has to come up with strong measures,” said David Thebault, head of quantitative sales trading, at Global Equities.


Today’s agenda

Coming up today we have:

• UK manufacturing PMI at 9.30am

• Mario Monti, the Italian prime minister, meets Finnish counterpart Jyrki Katainen

• Monti meets Spanish prime minister Mariano Rajoy in the early afternoon

• US manufacturing data at 3pm

•US Fed interest rates and quantitative easing announcement at 7.15pm UK time


Nationwide house prices

Outside the eurozone, in blighty to be precise, the outlook is no brighter. The Nationwide building society has reported that house prices have posted their biggest year-on-year decline in almost three years. A 2.6% drop has taken average prices to £164,389 in July, Nationwide said, with prices 13% below their 2007 peak. One consolation is that this fall is less than in the US and Spain, which have fallen by around a fifth since their pre-crash peak.

Robert Gardner, Nationwide’s chief economist, said: “UK house prices declined for the fourth time in five months in July, with prices falling by 0.7%. This pushed the annual pace of price growth down to minus 2.6%, from minus 1.5% in June – the weakest outturn since August 2009.”

Gardner said the summer soaking and the Queen’s Diamond Jubilee had played their part but could only partly explain the “disappointing performance” of the wider economy.

He said: “Against this difficult backdrop, it could be argued that UK house prices have shown resilience. While prices are currently 13% below their 2007 peak, this is less than the declines seen in a number of other economies that have experienced similar or more robust economic recoveries.”


Geithner’s call to action

Good morning and welcome to our rolling coverage of the eurozone crisis. Another busy day ahead with some events overnight to catch up on.

The US treasury secretary Tim Geithner has urged European leaders to do more to end the eurozone crisis after holding meetings this week with the German finance minister, Wolfgang Schaeuble and the president of the European Central Bank, Mario Draghi. In a highly prescriptive intervention, Geithner told Bloomberg TV that Europe had to take steps including “bringing down interest rates in the countries that are reforming and making sure those banking systems can provide the credit those economies need.”

The treasury secretary was speaking ahead of an ECB meeting starting today that carries the latest hopes of politicians and investors for incisive action that will calm the markets. Those hopes had been raised by Draghi saying last week the ECB would do whatever it takes to save the euro.

“What you know, from what Europe has said, that they are committed to doing what’s necessary to hold the Europe Union together,” said Geithner. “I absolutely believe they have the means to do it.”

Geithner said past financial crisis showed that the longer it took to address the issues, the more they cost. “I believe they understand that. That’s why they’ve signalled they are prepared to move further. Now again, this is going to take time,” he added. © Guardian News & Media Limited 2010

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