Economic news worsens

FTSE holds up despite news the UK economy has contracted further and mortgage levels are some 60% down on last year Editors 23 December, 2008 | 2:47PM
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The FTSE has held up well through much of today despite the increasingly gloomy economic statistics being released which show the UK economy contracting and mortgage approval rates falling to record lows. The FTSE 100 rose just over 1% as of 2:30pm to a level of 4294.59. Although volumes have been thin as the markets head into a Christmas breather, the leading stocks in trade on the FTSE All-Share today have been internet company Yell, Salamander Energy and building supplier Travis Perkins.

Among the economic news released today were figures from the British Bankers Association showing 17,773 mortgage loans were approved for homebuyers in November, down from 20,767 last month and some 60% down over November 2007. According to the association this is the lowest level since it began records in 1997.

The 1.5% reduction in UK base rates last month did little to boost the mortgage market as lenders re-assessed their product ranges and the number of lenders in the market is continuing to shrink. BBA statistics director David Dooks said the encouragement of lower costs did not filter through largely because people remain concerned about the impacts of the rapidly slowing economy on their personal finances.

Bank shares had a mixed morning of trading with the price of Banco Santander, owner of Abbey, falling just 0.08% by 2pm, Lloyd’s TSB shares rose 1.46%, HBOS was up 0.15%, HSBC was down 2.08% and the share price of Barclays was up 0.69%.

Other economic figures released today shows the UK’s economy shrank over the third quarter and was the worst single quarter since 1990, according to some reports. The Office for National Statistics (ONS) said GDP over the third quarter, ending 30 September, was 0.6% down on the previous quarter.

Consumer spending also fell over the past quarter with the ONS reporting the only two areas of growth were clothing and footwear as well as recreation and culture. All other product areas experienced a decrease in growth, most notable of these were food and drink and alcohol and tobacco.

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About Author Editors  analyse and report on shares, funds, market developments and good investing practice for individual investors and their advisers in the UK.

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