Reasons to be cheerful… parts one, two, three and four

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A SERIES of new economic indicators has suggested that the severity of the recession in the UK is easing.

Consumer confidence across the UK increased at its fastest rate for two years in April as people felt more optimistic about the economy, according to an index by Nationwide.

There were further signs of increasing confidence in the housing market, with the majority of first-time buyers believing the bottom of the property market had now been reached.

There was good news for consumers with food price inflation easing for the first time this year and better results on the stock market as shares rose 3 per cent across the board, partly led by a 13 per cent RBS rise.

The new reports followed evidence earlier in the week that businesses increasingly believe that the worst of the recession could be over, and yesterday, Ben Bernanke, the head of the Federal Reserve, said the US recession should "bottom out" over the coming months.

But business leaders urged caution, warning that the UK economy was still on course to contract further through this year and into 2010, and, while positive, these latest indicators showed nothing more than that the worst effects of the recession were easing.

Iain McMillan, director of CBI Scotland, said: "The results of these surveys would suggest that some of the conditions in the economy which are necessary to produce the start of the recovery appear to be taking place."

But he added: "We are still expecting the UK economy to contract by 3.9 per cent in 2009 and in the first half of 2010 before GDP turns positive in the second half of next year."

David Watt, of the Institute of Directors in Scotland, said: "It would seem that levelling out is the new growth. By that I mean there is some evidence that we are levelling out, but we do not appear to be actually growing yet – there is certainly not the rate of decline we have seen in the past."

Mr Watt said construction was still suffering, but there appeared to be signs of optimism in other sectors.

"I don't speak to that many people who are still all doom and gloom," he said.

Chancellor Alistair Darling based his Budget projections on forecasts that the UK economy would start to recover towards the end of this year and these have since been decried by economists and business leaders. However, the Chancellor is likely to have been cheered by yesterday's evidence.

The Nationwide index rose by eight points to 50 during the month, the biggest monthly increase since May 2007.

All measures of confidence improved in April, but the increase was driven by a steep jump in the proportion of people who felt upbeat about how the economy and labour market would be performing in six months' time.

Martin Gahbauer, Nationwide's senior economist, said: "In recent weeks, we have seen a strong rebound in global equity markets and some tentative signs of improvement in housing market indicators, both of which may have contributed to the marked upturn in consumer confidence during April.

"A number of the world's largest banks also announced a return to profits and this may signal the start of a thaw in the money markets and an improvement in lending conditions.

"However, it is likely that the UK economy will continue to contract for some time yet, so it is too early to say whether this trend in confidence will continue into the next month as consumers continue to digest further industry data and the 2009 Budget."

In a sign that the worst of the shop price misery for consumers may be over, the British Retail Consortium said that food inflation had eased.

Annual food inflation remained historically high at 7.9 per cent in April, but this was lower than the 9 per cent seen in March thanks to a more stable pound, according to the latest BRC-Nielsen Shop Price Index.

A sharp fall in the value of sterling has seen retailers hike prices to offset higher import costs.

Meat and some vegetable prices continue to come under pressure from currency effects, but the BRC said inflation more generally had been helped by a slight recovery in the pound.

Although there was some sobering news from another fall in house prices in Scotland yesterday, there was a strong indication that first-time buyers may be ready to re-enter the market.

According to property website Rightmove, around 57 per cent of those hoping to get on to the property ladder said they thought house prices would either stay the same or increase during the coming 12 months, while 69 per cent thought it was currently a good time to buy.

One in five first-time buyers even said they thought it would be more difficult to buy their first home in a year's time, viewing the current market as a window of opportunity for people with a substantial deposit.

There were further positive signs on the markets, where overnight gains on Wall Street helped London's FTSE 100 Index storm nearly 3 per cent ahead yesterday as traders returned in a bullish mood after the long bank holiday weekend.

Resurgent banks led the FTSE more than 100 points higher, taking the lead from positive trading on America's Dow Jones Industrial Average and indices across Europe that were open on Monday.

RBS was joined on the risers board by Lloyds Banking Group and Barclays, up 11 per cent and 6 per cent respectively.

House sales down by 50% compared to same time last year

THE number of houses sold in Scotland during the first quarter of the year fell by more than 50 per cent compared with the same period last year, as the housing market continued to struggle in the economic downturn.

Registers of Scotland, which records house sale statistics, also released new figures yesterday that showed that prices fell by nearly nine per cent since the start of this year.

The report showed that compared to 27,507 houses sold during January to March, 2008, just 11,800 were bought in the comparable three months of 2009, a drop of 57 per cent.

The average price of a residential property in Scotland between January and March was 140,318, representing an 8.7 per cent decrease on the previous quarter.

East Renfrewshire had the highest fall in detached house prices, at 28.5 per cent, while Edinburgh recorded a decrease of 6.8 per cent.

However, Professor Gwilym Pryce, Chair of the Scottish Housing Economics & Finance Research Network who analyses housing data for the Glasgow Solicitors Property Centre (GSPC), said that he believed that house price falls were beginning to ease off.

Prof Pryce said there were likely to be price rises during the coming months, but said that they were likely to be blips caused by home owners who had held off for the best price possible, but finally sold through force of circumstances.

Alasdair Seaton, chartered surveyor with DM Hall in Dunfermline, said that he believed that Registers' figures did not reveal the extent of the recovery currently being experienced by the Scottish housing market.

"There is a delay between when houses are sold and when the data gets passed to the Register," he said. "So a lot of the information we are seeing just now is accurate to four or five months ago, when we were in the depths of despair.

"In my view, the market dropped very quickly in my area, 15 to 20 per cent, in April, but did not change very much after that. I would say that in the first few months of 2009, there has been a lot more optimism, a lot more viewers and more houses selling, but only where people are willing to accept that house prices are no longer near where they were at their peak."

He cautioned that there was still downward pressure on the market, but said he felt it was well on the way to levelling out.

However, a report on housing affordability yesterday warned that the market is widening the wealth gap between the rich and the poor.

The report by National Housing and Planning Advice Unit suggested that the wealthiest 10 per cent of the population had seen home values rise at more than three times the rate experienced by the poorest 10 per cent.