Jim Armitage: An economy based on property has much to fear

Outlook Believe it or not, the Bank of England isn’t just a bunch of bowler-hatted types stuck behind desks in Threadneedle Street.

It has agents up and down the country interviewing business people on how their companies are faring: what goods are selling well, whether they’re hiring or firing, that sort of thing. The monthly bulletins that result rarely get reported, but are useful because they layer anecdotal evidence on top of the regular run of dry economic stats.

Superficially, October’s feedback had much to cheer – order books are swelling in most sectors, employment is expected to increase, and access to credit has improved.

But it is striking how much of this positive stuff is related, directly or indirectly, to the property market.

Business services firms – accountants, lawyers and the like – are growing because of an increase in construction deals; manufacturing and retail sales are being kept afloat by sales of kitchens, bathrooms and furniture thanks to people moving house; business investment is growing as firms spend more on doing up their premises or moving to new sites. Property, property, property.

Exporters, meanwhile, were gloomy, with all, from farmers to manufacturers, complaining of eurozone weakness, Russian belligerence and war in the Middle East. That means we will be reliant on the domestic economy for years to come. With this still clearly so dominated by the world of bricks and mortar, one has to wonder, what would happen if interest rates start to rise? Disaster, that’s what.

The Bank’s other document release yesterday – the minutes to the Monetary Policy Committee’s last meeting on rates – show a continuing doveish slant. Good job, too.