24th March – Pound rate falls

Chancellor George Osborne unveiled his 2011 budget suggesting a ‘budget for growth’ but cut growth forecasts for this year and next. He did however manage to throw in some ‘sweeteners’.

Key announcements include:-

- Fuel duty cut by 1p per litre from 6pm last night;

- A government-backed shared equity scheme will help get 10,000 families onto the housing ladder;

- From April 2011, corporation tax will be reduced by 2% (from 1% previously), and will continue to fall by 1% over the next three years to 23%;

- Estimated debt as a percentage of GDP should be falling one year earlier than forecast: 2014/15 (from 2015/16 previously);

- Borrowing seen down from £146 billion this year to £29 billion in 2015/16;

- Unemployment is still expected to peak this year;

- GDP forecast for 2011 has been revised down from 2.1% to 1.7% due to the weaker than expected final quarter of 2010, the rise in commodity prices and increasing inflation;

- The 2012 forecast has been downgraded from 2.6% to 2.5%; and

- Inflation is expected to stay between 4-5% this year, and fall to 2% by 2013.

Elsewhere, a third euro zone bailout is now likely after the resignation of the Portuguese Prime Minister, Jose Socrates, who resigned after the Portuguese parliament rejected an austerity budget. Opposition parties said the budget, the fourth package of austerity measures in a year went too far.

The vote comes on the eve of a European Union summit to finalise a euro zone debt crisis plan.

In the US, the sale of newly built homes in the US hit its lowest level in February since records began in 1963 registering only 250,000 new home sales on a seasonally adjusted annualised basis. The figure was down 17% from January, the third monthly fall in a row.

“We fully expect further price declines in order to help clear inventory from the market, although this problem is more acute in the existing home market than the new home market,” said San Greenhaus, economist at brokerage Miller Tabak.