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Keeping a lid on the asset boom

The boom in global asset prices, from stocks to bonds and housing, is exacerbating inequalities globally, so whether it's to pay for the economic support or to stem the prospect of unrest, government interventions are likely to become a feature of the coming economic cycle - a theme in the Wealth Report.

On Thursday the IMF that New Zealand could see a pronounced correction following "unsustainable" rises in average house prices of about 22% in the past year, adding that it should implement policies to dampen speculative demand from investors. Already under pressure, the government last month asked the Reserve Bank of New Zealand (RBNZ) to consider the impact on housing while formulating monetary policy decisions in future - a novel idea that may be picked up elsewhere.

"Ordering the central bank to make housing price stability a higher priority is a start, and could inspire others to rethink the role easy money has played in driving financial instability," Ruchir Sharma, Morgan Stanley Investment Management鈥檚 chief global strategist, . New Zealand PM Jacinda Ardern and 鈥渉er fellow progressives worldwide have come to embrace easy money as a way to finance social programmes, but need to recognise its negative impact on financial stability, wealth inequality and housing affordability."

Supply rebalances

While recent movements in UK house prices have been rather tame in comparison, the property market does appear on the verge of a robust period of activity as the impact of the pandemic slowly begins to fade.

The number of enquiries via the internet, listings portals and social media reached its third highest level in more than a year in the first week of March, writes Tom Bill. And while supply had fallen in the first two months of the year as many prospective sellers were occupied with home-schooling and hesitated due to new Covid variants, that now appears to be in reverse - the number of new sales listings in England and Wales rose 18% week-on-week in the seven days to 6 March, the highest such rise since June 2020.

A reminder that on Friday we revised upwards our forecasts for house prices.

GDP outperforms

UK economic output in January, outperforming expectations of a drop of .

The National Institute of Economic and Social Research predicts a contraction of 2.4% over the first quarter as a whole, and leading indicators point to a strengthening in many sectors from here onwards. A Make UK and BDO survey of 314 companies between February 3 and 24 suggests manufacturers are now due to stronger-than-anticipated demand and a Reed study of 10,000 recruiters suggests job vacancies are now almost back at pre-pandemic levels. on improving sentiment among companies from Accenture.

All this means the Bank of England monetary policy committee is likely to leave much unchanged when it publishes its latest meeting minutes on Thursday, including leaving the base rate at a record low 0.1%. It is one of many central bank committees and the minutes covering the recovery, further stimulus and the prospects for inflation are likely to make for interesting reading.

China's recovery

China鈥檚 factory and retail sector activity surged in the first two months of the year. Though the annual figures were distorted due to last year's lockdown, they do point to a broad and sustained recovery.

What was the world's first post-pandemic economic boom has translated into a , despite the government's efforts to cool the market. New home prices in China rose at their fastest pace in five months in February.

At its annual legislative session earlier this month, the government in some of its largest cities. Average new home prices in 70 major cities grew 0.4% in February from a 0.3% gain in January, according to Reuters calculations based on official data. New home prices rose 4.3% in February from a low base last year, after a 3.9% increase in January.

In other news...

In a new Rural Update, Andrew Shirley investigates how farms and estates will be paid post-Brexit for going green.

Plus, the full impact of the pandemic has on high streets, despite store closures hitting 48 per day, the city $500 per month to live there, sterling as speculators push it higher, US stimulus package leaves Europe standing , Lloyds Bank and the investor battle for , and finally, the of the world鈥檚 baby bust.

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