The recession in the UK is over, GDP expanded again in the fourth quarter. The economic indicators are pointing to a further improvement, even though we are hardly talking about a booming recovery. Inflation rose to 3.5 %, although the price pressure should gradually ease again.
The Bank of England has suspended its program of purchasing government bonds and will resume it only in an extreme case. The central bank will presumably carry out a tightening of monetary policy in the form of higher key interest rates only later in 2010. Yields on 10-year Gilts will probably rise, also because of the concerns over the public debt. The Pound Sterling will appreciate against the Euro only when a budget consolidation and later this year also a more restrictive monetary policy by the British central bank will come into view.
The real estate markets were not able to escape the global financial and economic crisis. As a rather late-cycle sector, real estate will be suffering for some time to come from the after-effects of the deepest recession in decades. There are signs of hope, however: while the over-whelming majority of rental markets are still characterized by declining rents, the investment markets continued to report rising turnover in the fourth quarter of 2009. Moreover, real estate values are once again in an uptrend in the British market, the first of the large investment markets where this is happening.
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Germany is currently experiencing the snowiest winter in thirty years, and the mood in the financial markets also points more to an ice age than a global warming. How icy are the times actually, and with all the snow drifts and concerns about Greece, are the markets not perhaps overlooking the cyclical upward forces that are currently manifesting themselves?
» PDF, 163 KBDr. Gertrud R. Traud
Chief Economist/Head of ResearchAdobe Acrobat Reader is required in order to view or print the documents.