House price fall eases

A woman passes property signs, in west London in this file photo from October 2, 2008.

LONDON (Reuters) - The drop in house prices in England and Wales eased further in July and retail sales rose across Britain, surveys showed on Tuesday -- yet more signs the recession-hit economy is starting to find its feet again.

Recent economic surveys have suggested the worst downturn in decades in Britain could be coming to an end, but policymakers are concerned any recovery could be sluggish because households and businesses are struggling to find reasonably priced credit.

"It's a relatively positive set of housing and consumer data which sits well with our view that the Bank of England will signal it has committed enough stimulus for now in tomorrow's Inflation Report," said Richard McGuire, a strategist at RBC Capital Markets.

The Royal Institution of Chartered Surveyors said its seasonally-adjusted monthly house price balance of surveyors reporting a rise in prices versus those reporting a fall rose to -8.1 last month from -17.6 in June.

That was the highest since August 2007 -- when the credit crunch first gripped hold of world markets -- and marks a run of improving figures since the start of the year which indicate prices could soon start to rise on the RICS gauge.

"The latest survey provides more evidence that activity in the housing market is picking up, albeit from historic lows," RICS said.

Newly agreed sales are also on the up, with the highest reading since August 1999, and the ratio of sales to the stock of property still on the market -- often used by analysts to predict future price movements -- rose for a seventh month.

A broadly improving month also saw price expectations rise, with four out of the survey's 10 regions expecting an increase in house prices.

Government data published separately reinforced the view that housing market weakness is be tailing off. The Department for Communities and Local Government said house prices fell 10.7 percent in June compared with a year earlier.

Other official data showed Britain's trade deficit widened slightly more than expected in June to 6.451 billion pounds, but analysts said that did not alter the trend of an improving trade balance and augured well for second-quarter GDP.

An unexpectedly sharp 0.8 percent decline in GDP in that quarter was part of the reason for the Bank's surprise 50 billion pound expansion of its quantitative easing programme last week.

The central bank's quarterly inflation and growth forecasts on Wednesday should shed some light on where policy is heading.

BETTER RETAIL SALES

A survey overnight from the British Retail Consortium showed the consumer mood is slowly improving.

Retail sales rose in July compared with a weak month last year, the BRC said, with the value of like-for-like sales up an annual 1.8 percent.

The value of total sales -- which includes new floorspace -- rose 3.6 percent on a year ago.

"The relatively healthy retail sales monitor further raises expectations that the economy will achieve growth in the third quarter -- albeit modest -- after five quarters of overall contraction," said Howard Archer at IHS Global Insight.

The BRC said sunny weather at the start of the month had helped clothing clearance and summer food sales and wetter weather towards the end of July had boosted furniture and homewares sales.

While the figures may indicate the consumer is starting to feel more confident given evidence of brightening economic conditions, the BRC was cautious about the outlook.

"Rising unemployment and job-loss fears will continue to hold back the widespread return of consumer confidence for some time yet," said Stephen Robertson, director general at the BRC.

(Reporting by Matt Falloon; editing by Andy Bruce)