British house prices and retail sales shot up at their fastest pace in four months in November, reports showed on Tuesday, defying growing speculation that the economy has run out of steam. The pound soared and interest rate futures fell after the new figures challenged the view that the Bank of England is perhaps done with raising borrowing costs for at least the foreseeable future.
"Today's data, at the very least, suggests that it is premature to write off either the housing market or the consumer just yet," said Simon Rubinsohn, chief economist at Gerrard.
"For the time being, interest rate policy is likely to remain on hold but the Monetary Policy Committee could be moved to tighten further if the better news flow in these key parts of the economy is sustained in the early part of the next year."
Certainly, BoE Governor Mervyn King is still keeping an open mind. He noted in testimony to parliament on Tuesday that while the economy had entered a soft patch in the third quarter, there were still few signs that this was the start of a more serious slowdown.
The BoE has raised interest rate five times in the last year in part to cool rampant house price inflation but recent signs of a turn in the property market have analysts betting that the next move in rate could even be down.
But the Nation-wide building society said on Tuesday that house prices jumped 1.0 percent this month, more than reversing October's 0.4 percent fall which was the first in three years. "It's hard to believe that prices really rose by as much as 1.0 percent in the month, but the fact that they did rebound after October's fall does suggest that the underlying slowdown in the property market is not too severe," said Ross Walker, UK economist at RBS Financial Markets.
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