UK prices cooling

More indications that prices in the UK, especially those in the housing market, are cooling off.

FT reports that factory price inflation has abated.

The price of goods made in British factories unexpectedly fell in May on the back of a sharp drop in the price of petroleum products and goods made of recycled materials such as scrap steel, official figures showed on Monday.

Prices at the factory gate were on average 0.2 per cent lower than in April, which pushed the annual rate of input price inflation down to 2.7 per cent from 3.3 per cent a month earlier.

Manufacturers’ cost inflation, which has run in double digits over the last year, also slowed between April and May but not as markedly as expected. Input prices rose on average 0.2 per cent, bringing the annual inflation rate from 10.2 per cent in April to 7.8 per cent.

So has house price inflation, according to the same report.

Separately, house price inflation as measured by the Office of the Deputy Prime Minister, which had been showing much higher levels than other indices in recent months, fell back into line with the general consensus in May.

House prices rose 6.9 per cent in the year to April, compared with a 12.6 per cent rise in the year to March, according to the ODPM. Annual house price inflation in London was 2.7 per cent compared with 9.8 per cent a month earlier.

According to another FT report, sentiment among professionals in the housing market appears to corroborate the figures.

Estate agents and surveyors were more pessimistic in May about house prices than at any time since November 1992, the Royal Institution of Chartered Surveyors reports on Tuesday... In its closely watched monthly survey, Rics said 49 per cent more estate agents reported house prices had fallen over the past three months than said prices were rising, the worst seasonally adjusted reading for more than 12 years.

However, yet another FT report indicates that househunters think that prices are stabilising.

Confidence among househunters rebounded in May as six months of fairly stable house prices left homebuyers to predict that prices will remain robust over the next year, according to a survey. The average expectation for house price inflation over the next 12 months was for a drop of just 0.3 per cent in May, compared with expectations of a sharp fall of 7.7 per cent in April, according to Propertyfinder.com. Further evidence of stabilisation came from the fact that buyers and sellers had similar expectations in May, the internet property portal said.

More inflation data out of Europe and the US later today and tomorrow.