The US economy saw its first growth in over a year, rising to an annual rate of 3.5% between July and September.

Experts believe that a major spending plan by the US government which featured a scrappage scheme to encourage the car sales market has been the main cause of the upturn.

Some economists believe that there could be more setbacks lurking ahead, despite the official statistics showing that the recession is over.

A spokesman at the White House announced that recent economic progression was “a welcome milestone” but it would take more time for a full recovery to be recognised.

The US economy had risen 0.9% in relation to the previous three months, whereas the UK economy remained in recession, unexpectedly dropping 0.4%.

Hugh Pym, the chief economics correspondent for the BBC, revealed that the growth rate of 3.5% was greater than the 3.3% predicted by most experts.

He continued:”The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK.”

“That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole.”

The last time the US economy grew was in the second quarter of 2008, by an annual rate of 2,4%.

The National Bureau of Economic Research will reveal the full extent of the US economic climb from recession when it analyses all the factors.

Some factors were significantly responsible for helping US economy during the third quarter, according to the Commerce Department.

The spending on durable manufactured products rocketed up at an annual rate of 22.3% which was the highest quarterly figure since 2001 and was spearheaded by the ‘Cash for Clunkers’ scheme helping new car sales.

Consumer spending increased on housing products by 23.4%, the greatest quarterly surge in 23 years, and came as a result of an improving housing market.

The big increase is considered by many to be due to the government’s $8,000 tax credit provided to first-time house buyers.

Government spending increased by 7.9% as stimulus spending spread and exports saw their biggest rise since 1996, rising by 21.4%.

Brian Bethune, an economist for HIS Global Insight stated that “it’s good to have the economy growing again.”

“But we don’t think that rate of growth is sustainable because it is distorted by all the government stimulus.”

“The challenge here is to get organic growth - growth that isn’t helped by fiscal steroids.”

However, unemployment is at a rate of 9.8% and a sharp fall came in September in the car sales industry as a result of the popular car scrappage scheme coming to an end in August.

Dean Baker, co-director of the Centre of Economic Policy Research believes that “you can say that the recession is over, but it sure won’t feel like that.”

“There is a lot of downward momentum that isn’t going to go.”

Plans to split British bank Northen Rock in two which would allow for its partial sale has been granted by the European Union.

The divide would result in two separate banks forming and are already being described as the “good” and “bad” banks.

The “good” bank would offer new lending, retain some of the existing mortgages and hold its savers’ money.

The “bad” bank would be used to repay the existing government loans and hold the remaining loans.

 Decisions made by the EU to accept the move are seen by Northern Rock as “an important and positive step.”

Changes to the existing setup will be made towards the end of the year.

The EU revealed that the good portion of the bank would be expected to grow and then be sold to third party, with the bad bank allowing its assets to dissolve then becoming liquidated.

The good bank may be sold prior to the general election next year with potential buyers being speculated already, with Virgin and National Australia Bank, owner of Clydesdale and Yorkshire Bank, among the interested parties.

EU Competition Commissioner, Neelie Kroes, believes that the move would make the bank a good long-term option, revealing that “this decision demonstrates once again that the EU’s state aid rules provide an appropriate framework to allow state support for a sustainable restructuring of banks without giving individual banks an unfair competitive advantage.”

Whilst Jonathan Todd, European Commission spokesman, said caps would need to be applied for the duration that the good bank remains owned by the public.

Some of the caps include a balance sheet reduced to a quarter of its size prior to the crisis, not being the market leader for loan interest rates, a cap set to limit its lending to one-third of Northern Rock’s 2008 levels and also a cap on retail deposits to be slightly lower than the pre-crisis level.

An investigation was engaged by the EU into Northern Rock in April 2008, two months after its nationalisation.

The results from the investigation showed that the UK government was kept at a “necessary minimum”.

By 30 June, the bank had paid back approximately half the taxpayers’ £26.9bn loan and will gain a further £8bn from the government during the end of year restructuring.

The EU stated that the restructuring would reduce its market share to below half of its pre-crisis level and “correct the excessive expansion of Northern Rock pre-crisis.”

Northern Rock released a statement, saying “this approval is an essential requirement of the planned legal and capital restructure, which is central to the business plan for Northern Rock.”

“The restructure will strengthen the capital and liquidity position of Northern Rock significantly, and offers value for money to taxpayers” and it would be “business as usual” for its customers.

According to official figures, the UK experienced an unexpected contraction of 0.4% for the third quarter, showing that the UK is still stuck in the recession.

This quarterly contraction is the sixth consecutive contraction, the worst run of figures that UK gross domestic product (GDP) has experienced since records began 54 years ago.

The GDP of a country represents the value of goods and services produced by a country. The figures released may be altered at a later date, as this is just a first estimate.

The Office for National Statistics (ONS), had been expected to show quarterly growth of 0.2%. However, no growth in retail sales for September and a 2.5% fall in industrial output for August had dented people’s positive expectations.

Experts have revealed that one of the main causes of the contraction was an unexpected drop in the services sector, with distribution, catering and hotels generating some of the worst figures.

Nearby countries France and Germany exited the recession earlier this year, and it is generally considered that the UK’s reliance upon the services sector, and more specifically, the finances sector being the main reason.

The UK economy has now experienced a 5.9% contraction since its high point prior to the recession.

The Bank of England is set to re-think its quantitative easing plan after seeing such a poor result in GDP figures. Quantitative easing involves the Bank of England printing money to buy bonds from companies and banks in an effort to encourage positive activity in the economy.

HSBC’s Bronwyn Curtis spoke with the BBC, revealing that “back in August we had a worse-than-expected second-quarter GDP number and that is the reason that the Bank of England extended the quantitative easing programme,”

ING’s James Knightly felt that the data was “awful with no positive news” and “clearly suggests that the likelihood of an expansion in quantitative easing by £50bn or so over the next quarter is rising, although [it] is not a foregone conclusion.”

It is considered by many experts to be disturbing that measures taken by the government and the Bank of England have failed to make a positive impact. However, David Kern, the chief economist with the British Chamers of Commerce believes that “continued intervention - including help for businesses to access finance, and incentives to promote investment - is still needed.”

“Above all else, business confidence must be nurtured, to ensure that recovery is not further delayed.”

Official statistics show that one of the main measures of inflation has reached its lowest point since September 2004, another sign of sterling weakening. The annual rate of 1.1% in September was lowered from 1.6% in August by the Consumer Prices Index (CPI).

A separate measure of inflation conducted by the Retail Prices Index (RPI) found that mortgage interest payments and housing costs also dropped, from -1.3% to -1.4%.

The pound also reached its lowest point in the past six months when it fell 0.5% against the Euro to 1.0628 Euros and to a five-month low of 1.5730 US Dollars.

Weak

Duncan Higgins, a senior analyst for Caxton FX, felt that “this is bad news for the pound.”

“The CPI figures will weigh heavily on the UK currency and will continue to discourage investment.”

A report conducted by the Centre for Economics and Business research predicted UK interest rates would not rise above 0.5% until 2011 and fail to meet the 2% mark until 2014; a further damnation to the outlook for the pound.

Meanwhile, the strength of the UK economy was dealt a further blow last week when it was revealed that industrial output dropped in August.

A prediction for the GDP had to be recalculated by the National Institute of Economic and Social Research after the UK economy failed to grow during the June/September quarter.

However, the economy is still very “frail” according to the British Chamber of Commerce (BCC), despite business confidence improving.

In an effort to sustain a stable broader economy and prices, the Bank of England is making efforts to retain 2% CPI inflation. Should the CPI inflation drop below 1%, the governor of the Bank of England must provide a written explanation to the Chancellor, Alistair Darling.

High energy prices a year ago, in comparison to lower energy prices this September are being blamed for the recent fall in inflation. The Office for National Statistics (ONS) reported that electricity, gas, and other fuel bills tumbled by 7.3%. Energy costs have started to level more recently, with little change from August to September.

Jonathan Loynes from Capital Economics predicted that we can expect to see CPI back at the 2% mark by the start of 2010, due to increased energy prices and VAT returning to 17.5%. He does believe that a “huge amount” of unused production capabilities would keep inflation down and “keep alive the threat of a period of outright deflation late next year or beyond.”

In contrast, Keith Wade of Schroders UK forecasted that it “probably will be the low point in inflation.”

Estate Agents face scrutiny after a watchdog revealed it would be watching their competition closely.

It has been four years since the Office of Fair Trading (OFT) last studied the fairness of estate agents work, but a new campaign will be launched in 2009.

Some of the things that will be assessed include internet property prices, consumer protection and competition between different companies.

The OFT chief executive, John Fingleton has said: “Buying or selling a home is something most people do only a few times in their life, but it is usually the biggest transaction they will make.
“We want to ensure that consumers are served well when buying or selling a home and are supported by an effective, competitive and innovative market.”

The industry has gone through some significant changes since the study done four years ago. These changes are not only because of the recent boom and then downturn of the market that we have seen recently, but also changes in several regulations.

The introduction of Home Information Packs and new legislation protecting consumers from unfair practices are a couple of other changes that have occurred since the last mediation.

 The study is expected to be finished by the end of 2009, and will review whether these new rules are adequate enough to protect people using this market.

The review will also look at how easy it is for new estate agents to get into this market, especially online providers, along with the quality and prices charged by all provides.

Concerns about the market were initially raised while the housing prices were at their highest, but in June this year, former head of the OFT, Bryan Carsberg, called for tougher regulations. He said that he thought all estate agents, letting agents and managing agents who handle residential property should be subjected to formal regulations and complete basic qualifications.

National Association of Estate Agents chief executive, Peter Bolton King, has said he welcomes the announcement of the review and also called for appropriate regulations.

He said that: “there is nothing to stop anybody becoming an estate agent and there is a real need for consumers to be aware of this.
“There is clearly a lot of competition between internet retailers, and many people will certainly initially begin their search for property online
“To be safe, consumers should use the professional agents.”

The OFT has the power to ban any agents that break the law when it comes to mis-describing a property, handling a client’s money, not declaring an interest in a property, or being found to have been involved in any other form of dishonesty.

A separate market study from the OFT was published in September, and revealed the market to be competitive, but recommended buyers get more help if they suffer delays moving into their property of find faults.

A report released today claims that of the 3 million of the UK population who take on seasonal work from home, the vast majority will be earning less than the minimum wage.  This is the time of year when companies involved in postal campaigns and similar issues will look to recruit those desperate for additional cash for the festive period.

While it is actually illegal to employ anyone at a rate less than the national minimum wage, the problem is that these people are desperate for that extra few pounds and will do just about anything.  It is a sad indictment of the UK business world when people are paid literally a few pounds an hour for such menial and time consuming activities.  Lets not forget that these are vital part of many mail shots throughout the country, and due to the low pay offered the “employers” are able to pocket more profit for themselves.

So how can you fight back?

Unfortunately for every person who decides to drop out because of the low pay there are another 10 ready to take their place.  While many were initially attracted to the working from home philosophy, because in the main it compliments their life style which may involve child care etc, it is not easy going.

How do the companies get away with paying an illegal rate?

While the laws were initially set up to avoid situations such as the ones we are covering, employers are able to get away with it by publishing unrealistic hourly targets for output, which when put into practice may take substantially longer to complete – resulting in a reduced hourly rate from the one published.

While the vast number of the 3 million UK residents who take on such work are under paid, there are still some reputable companies out there who will pay you a fair rate for a fair days work.  They make take a little finding, and they may offer a different kind of work, but they are there.   

While we have heard so many rumours and stories about possible takeovers, cash injections and a possible break-up of the business, it seems that Northern Rock just keeps rolling on.  While the authorities have indicated that they want the situation resolved as soon as possible, the loan from the Bank of England has risen to a massive £23 billion – all tax payer’s money!

Despite pressure from the Bank of England and the government to arrange a quick bail-out, the management of Northern Rock do not appear to be in any great rush – is it the fact that the authorities cannot afford to pull the rug from under them, or is it more complicated than that?

In all honesty it seems to be a mixture of the two, because even though the situation is not receiving anywhere near the same amount of press coverage as when it first began, the situation is still very critical – probably worse now than ever before.  While taking a step back, you also need to consider who in their right mind would take on a brand name which has been tarnished, as well as a £23 billion funding position – even though it will be backed by mortgages, loans, etc in the longer term.

Even after all of these weeks there is still no certainty that the business will survive in any shape or form and the longer it drags on the less chance of this happening.  The authorities are now in a very difficult situation as they cannot take the bank “private”, they cannot call in the loan and the pressure they have been exerting for a swift conclusion seems to be falling on deaf ears. 

Quite when and how this one will end is very very unclear.

In a move which will be rued by the credit card industry, the Lords have upheld an earlier decision to instruct a number of credit card companies to refund the cost of items which were bought overseas, but either did not turn up or were damaged.  In a move which was instigated by Lloyds TSB and Tesco Personal Finance they challenged the understanding of the Consumer Credit Act in relation to goods purchased outsdie of the UK

Under section 75 of the Consumer Credit Act, the credit card holder is insured for items with a value between £100 and £30,000 in the event of damage or non-delivery.  The action was brought about because of the recent upsurge in internet usage, which has seen a massive rise in the number of products purchased online from overseas traders.  The potential cost to the credit card industry could run into millions if not billions of pounds in the years to come.

The finance companies involved had tried to argue that overseas purchases were out of their jurisdiction and should therefore not be covered by UK regulations.  However, the counter argument that it cost more to buy goods overseas was brought up time and time again, and the fact that consumers should at least be able to expect the same level of cover seen in the UK.

It will be interesting to see how the credit card companies react - Will they increase charges? Will they ban overseas transactions? Or will they just take the ruling on the chin? What ever you think, it seems inevitable that the consumer will be forced to dig deeper at some stage.

As they say, what goes around come around……

An official ruling last week has caused further confusion in the mortgage endowment market, where many IFAs were hit with compensation claims as client endowments failed to cover the value of their mortgages, as had been “promised”. The Financial Ombudsman has ruled that an IFA who was previously forced to pay out compensation can, in the event that the policy is in surplus at the end of the term, claim back all or part of the compensation paid out.

Not only does this ruling further muddy the water, but it will also cause major logistical problems with IFAs now obliged (for their own benefit) to monitor all final endowment payouts.  Even though this ruling does seem fair on the surface, it does not seem to take into account the pressure and financial strain which many endowment holders felt.  In some ways it seems that IFAs will possibly benefit from a rebound in investment returns (if it happens) even though their advice may well have been technically flawed initially.

Many experts are now expecting a mass of IFAs to take court action to retrieve as much of their compensation payments as possible.  It seems that while many thought the endowment issue was dead and buried, this may not be the case.

It also open the door for a possible reversal of past claims in other areas, where the financial markets may well have bailed out advisers if investment instruments were left to mature. 

As the internet continues to bring the latest news, views and offers straight to your door step, many people are now asking about the role of Independent Financial Advisers, and whether they are actually worth the money they charge. Surely it is time to “go it alone” and look after your own affairs online?

While those with substantial experience of the financial markets themselves may well be able to “cut out the middle man”, the financial markets are still very dangerous for those who do not fully understand them.  What level of pension are your after? What can you really afford? Should you use up the equity in your home? Which tax free investments should you consider?

For many people these questions may as well be written in a foreign language, as they may mean nothing - where do you start? Who do you blame if it all goes wrong? What protection do you have?

For those who are not up to date with the financial markets and the vast number of products on offer, it is still highly advisable to go through your own Independent Financial Adviser.  They do have the experience, they do have the knowledge and above all you are protected if they give you the wrong advice.  Cutting corners with regard to your future financial well being can be incredibly risky, and should be averted unless you know what you are talking about!