UK services shrink, house prices decline

Bloomberg

An index based on a survey of about 700 service companies by the Chartered Institute of Purchasing and Supply was at 40.2 in December, compared with November’s 40.1, which was the lowest since the gauge began in 1996, Markit said yesterday. The average price of a home fell an annual 15.9 percent in December, Nationwide Building Society said in a separate report.

Consumer confidence dropped to the lowest since at least 2004 in December as rising unemployment rattled shoppers, Nationwide also said. Economists predict the Bank of England will cut the benchmark interest rate to 1.5 percent this week, the lowest ever, as the British economy endures the first recession since 1991.

"What we’ve seen gives no indication we’re out of the woods," said Matthew Sharratt, an economist at Bank of America in London. "My feeling is that the economy is going to get a whole lot weaker. We see rates going to 0.5 percent by the end of the first quarter."U.K. mortgage approvals dropped to the lowest level since at least 1999 in November and banks plan to curtail loans further to households and businesses, the Bank of England said Jan. 2.