Double warnings of the dreaded double dip

Against this background, two new indicators will cause concern: signs of a fall in house prices with warnings of a house price slump next year; and UK trade figures still showing no sign whatever of a desperately needed export recovery.

Of the two, it is the "no show" on exports that is the more worrying. But the warning on house prices will be a more immediate cause for doubt on our economic health.

Was last year's recovery in house prices a false dawn? And are we heading for a second house-price relapse?

Latest figures from the Halifax indicate a slowdown is under way. Property values fell slightly in the early summer compared with the start of the year, slipping by 0.6 per cent in June compared with May, following a 0.5 per cent fall the previous month.

More properties are coming on to the market and buyers have become more cautious. Two caveats must be entered at this stage. The first is over "average" UK prices, which can obscure considerable variability across the market, both by price segment and by geographic area. The figures can be particularly misleading for Scotland, which did not have so pronounced a boom and where a corrective downturn is - again in general terms - less evident. In the Edinburgh region, there remains keen demand for traditional family homes and prices have held up relatively well. One- and two-bedroom flats remain sticky.

The second is the more uncertain tone in the quarter covering the UK election and the approach to the budget. This may have temporarily discouraged buyers. But longer-term factors may also be at work. The forecasting firm Capital Economics warns in a new analysis that price relapse in the UK as a whole now looks the most likely scenario.

The experience post the 1990-92 recession saw a number of false dawns before a sustained recovery got under way. And today challenges to a housing market recovery look formidable: rising unemployment and spending cuts, while the squeeze on household incomes will compound constraints on mortgage availability. Add to this that the ratio of house prices to earnings is still historically high, and it is hard to contest the assertion that a period of flat house prices is the best that can be hoped for and a relapse more likely, with attendant knock-on effects on confidence and consumer spending.

More worrying are the signs that exports are still not picking up as much as hoped. The UK's trade deficit widened to a 22-month high of 3.8 billion month-on-month in May. The deficit in traded goods spiked up to 7.8 billion, export growth of 2 per cent smothered by import growth of 4 per cent.

Despite the lower pound, exporters are finding it tough going trying to sell into overseas markets, particularly Europe, where austerity programmes are under way.

A double dip recession is still not the consensus forecast - but it is looking touch and go.z