That’s all for today. A quick recap.

Factories in the UK, the eurozone and the US have all posted very rapid growth as demand jumped as lockdown measures are eased.

The UK manufacturing PMI, which tracks activity, hit its highest level since the survey began in 1992. The eurozone index also hit a record peak, with output and new orders surging.

And with US factories also reporting the strongest PMI reading since at least 2007, and China’s manufacturing growing at its fastest this year, the global index hit an 11-year high.

But cost pressures hit firms, forcing them to lift their own prices, while American bosses reported a struggle to find workers.

Inflation was also in focus in the eurozone, where the Consumer Prices Index hit 2% for the first time since 2018 - over the ECB’s target.

Energy prices were the main factor..... and that trend could continue, with Brent crude hitting $71 per barrel for the first time since March, as Opec+ ministers agreed to continue slowly increasing production.

US crude briefly hit its highest since 2018.

Opec+ didn’t set a plan for beyond July, though, as they wait to see how demand develops, and if sanctions on Iran are lifted as part of a nuclear deal with the US.

Optimism over the recovery drove world stock markets to a fresh record today, with analysts predicting further gains to come.

European stock markets hit a new peak tonight, while the FTSE 100 closed at a three-week high as rising commodity prices pushed miners higher.

Sterling hit a three-year high against the US dollar in early trading, but is now down half a cent at $1.4155 as traders wonder whether plans to end the lockdown on 21 June will be delayed.

Canada’s economy grew slower than expected in Q1, and looks to have contracted by 0.8% in April as new restrictions hit activity.

In the UK, house prices surged in May to a new record high, according to Nationwide.

Prices rose 10.9% over the last year, with the ‘race for space’ fuelling demand for larger, more rural properties with a garden.

My colleague Joanna Partridge writes:

Younger house buyers are just as keen on building a new life in the country as they are to move to the bright lights of a big city as they react to the post-pandemic changes under way in working patterns and rapidly rising property prices.

Data released on Tuesday by the Nationwide building society showed that demand for property has pushed average house prices up 10.9% over the past year, the fastest pace for almost seven years.

Prices rose on average by 1.8% in May, after a 2.3% rise in April, according to the figures, pushing the annual rate of increase up from 7.1% a month earlier.

The Bank of England is watching the housing boom closely, deputy governor Sir Dave Ramsden told us:

It’s been a busy day in the food sector. The UK firm behind Jammie Dodgers, Wagon Wheels and Maryland Cookies sold to Italy’s Ferrero (so there’ll be some new treats at the ambassador’s reception)....

....and donut maker Krispy Kreme has decided to float on US market after five-year gap.

Here are more of today’s stories:

Goodnight. GW

Global stock markets hit a new record high today, Reuters reports, as investors broadly shrugged off inflation worries.

MSCI’s gauge of stocks across the globe rose 2.51 points or 0.35%, to 713.96, marking a new record high, led by broad gains across Europe’s indexes (which hit a new record).

Today’s strong factory data also lifted stocks, ahead of a crucial US jobs report on Friday. It could give new clues as to when the US Federal Reserve could start tapering its bond-buying stimulus programme.

Reuters adds:

“Markets are letting the macroeconomic data lead the way with Treasury prices lower and yields higher after strong numbers this morning,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina, adding that news of oil supplies rapidly drawing down, which will lead to higher oil prices, has prompted traders.

Mark Haefele, chief investment cfficer at UBS Global Wealth Management, predicts stocks could have further to rise:

Although global stocks are now around 20% above pre-pandemic highs, a combination of strong earnings growth and reasonable valuations relative to still-low bond yields points to further upside for stocks.

At a sector level, we reiterate our preference for energy and financials, for which valuations and a supportive macro backdrop point to further catch-up potential following significant underperformance in early 2020.”

NatWest Group is preparing for a future where just 13% of staff work from the office full-time, as it becomes the latest major business to plan new remote working rules beyond the pandemic.

It means that about 8,300 staff will be expected to commute to the lender’s offices and branches daily, leaving the rest of its 64,000 employees to split their time between home and office, even after the government’s work-at-home orders are lifted.

One in three of the bank’s staff – more than 20,000 workers – will be able to live and work anywhere in the UK and have to attend their office in person only two days a month.

NatWest chief executive, Alison Rose, told staff last week.

“There is no ‘one size fits all’, as not every role is the same.”

More here:

We started the day with the news that UK house prices surged by nearly 11% over the last year.

And tonight, our economics editor, Larry Elliott, writes that three factors are behind the move -- in a double blow to young and the low-paid workers:

The first is the race for space, a pandemic-induced desire to find a property which has a garden and a room from which it is possible to work from home. There is a limited supply of these sorts of houses and in a sellers’ market prices are heading in only one direction: up.

The second factor is that borrowing money is cheap and likely to remain so. Dave Ramsden, one of the Bank of England’s deputy governors, says Threadneedle Street is closely monitoring house prices for signs of a more generalised inflationary threat, but there is no immediate prospect of borrowing costs being raised.

With official interest rates at a record low level of 0.1%, lenders have some tempting offers for potential buyers. It is not hard to find three year 60% loan-to-value mortgages at just below the current inflation rate of 1.5%, which means people moving to a bigger home are effectively borrowing for nothing.

The final factor helping to prop up prices is the diminished threat of unemployment. Unemployment is likely to peak at between 5% and 6% later this year, but that’s considerably lower than the forecasts produced this time last year. The people who are looking to sell up in London for a bigger place in the country are not those most at risk of losing their job.

Here’s the full piece:

Opec nations and key allies such as Russia have agreed to continue gradually easing production cuts amid a rebound in oil prices.

After a mainly online conference today, the OPEC+ group agreed to lift output in July, as part of their existing plan of gradually increasing supply by 2.1m barrels per day from May to July.

But production policy beyond July was not decided on, and the group will meet again on July 1.

Bloomberg says this has left the market guessing about what will happen beyond July:

OPEC+ stuck to its plan to hike oil output in July, but Saudi Arabia’s energy minister kept the market guessing as to whether the group will add more supply later this year to keep pace with the accelerating global recovery.

“The demand picture has shown clear signs of improvement,” Saudi Energy Minister Prince Abdulaziz bin Salman said, in some of his most upbeat comments since the crash last year. But pressed on whether more supply increases will be needed, he said: “I will believe it when I see it.”

European stocks hit a new record high today, and ended at a closing high too.

The Stoxx 600 index of leading European stocks ended 0.75% higher at 450.1 points, with the surge in factory growth last month cheering traders.

With oil and commodity prices rising, Energy stocks were the top sector, followed by basic materials (including those FTSE 100 miners), industrial stocks and consumer cyclicals.

Ticketing company Trainline was the top Stoxx 600 riser, up 6.6%, having slumped last month after the UK government announced it would run its own ticketing website, as part of rail reform. The Mail on Sunday reported that analysts think Trainline’s overseas arm could be a big growth driver instead.

Germany’s DAX gained almost 1% today, with France’s CAC up 0.66%, amid optimism for a strong recovery this year.

But....Mihir Kapadia, CEO of Sun Global Investments says investors should be cautious, given concerns about inflation (which rose above target in the eurozone today).

However, there are still concerns regarding policymakers, who remain focused on tackling inflation, which could still cap gains for some time.

This could be a slow process as we await further economic data but could be crucial in easing expectations and avoiding any unnecessary losses during this period.”

Back in London, the FTSE 100 blue-chip index has closed nearly 58 points higher at 7080 points, up 0.8% today.

That’s its highest closing level in three weeks, after it hit an intraday three-week high of 7118 points during today’s upbeat session.

Miners held their place as the top risers, boosted by stronger commodity prices and hopes of higher demand thanks to the surge in factory activity last month.

Anglo American, copper miner Antofagasta and Rio Tinto all gained around 4%, with advertising group WPP up 3.7% and steelmaker Evraz rising 3.3%.

The jump in crude oil prices lifted BP (+2.8%) and Royal Dutch Shell (+2%), with Brent at its highest since March and US crude touching the highest since 2018 (although it’s dipped a little since).

UK housebuilders also had a good day, with Barratt Development up 2.3% and Persimmon gaining 2.5%.

Banking giants HSBC (-2%) and luxury goods maker Burberry (-1.3%) led the fallers, with pharmaceuticals group AstraZeneca (-1.1%), internet security firm Avast (-1%) and online grocery technology firm Ocado (-0.7%) also lower.

Chris Beauchamp, chief market analyst at IG, says gains in stock indices have mirrored the sunny UK weather, lifted by the strong factory growth data from China, the eurozone, UK and the US.

Growth sectors such as health care and tech stocks continue to struggle compared to the cyclical areas such as mining - where UK commodity prices have driven the gains for the FTSE 100, he says.

Investors seem to be largely shrugging off concerns that Covid variants will continue to emerge, or that the UK’s reopening could be delayed, Beauchamp adds:

“Fortunately, there is a growing realisation that developed nations must do their part to supply vaccines to others, in a move that would ultimately benefit everyone.

“UK reopening plans for 21 June are in doubt thanks to the Delta variant, but for now that does not appear to be hitting risk assets in any significant way even as Scotland revises some of its plans for the lifting of restrictions.”

Crunch all today’s factory PMI reports together, and you find that the global manufacturing sector expanded at a robust pace in May.

Production rose at one of the fastest rates in a decade, as new order growth accelerated to an 11-year high. The outlook remained positive, with manufacturers forecasting further increases in output over the next 12 months.

This pushed the JP Morgan Global Manufacturing PMI to 56.0 in May, up from 55.9 in April, its highest level in over 11 years.

Solid improvements in business conditions were seen across the consumer, intermediate and investment goods sectors, with employment up...and price pressures growing as supply chains struggled.

Twenty four out of the 30 nations for which May data were available registered better business conditions.

Europe was a bright spot in the upturn, with the six top-ranked countries (the Netherlands, Austria, the UK, Germany, Ireland and Italy) located in that region. The US also saw a solid pace of expansion.

Subdued growth was registered in Japan, China, Russia and India.

The Philippines, Turkey, Thailand, Mexico, Colombia and Myanmar all saw contractions.

Transport news: Work to introduce driverless tube trains has been demanded by ministers as part of an emergency funding agreement for Transport for London, with the government injecting just over £1bn to help the capital recover from the pandemic.

TfL will be obliged to produce business cases for driverless trains on the Piccadilly and Waterloo and City lines in return for the latest funding, which also comes with a requirement to make £300m of annual cuts and slash pensions.

The mayor, Sadiq Khan, said the short-term settlement was a “sticking plaster” and that he had reluctantly agreed to the conditions.

However, he promised to fight any further moves to introduce driverless trains, which he said would cost billions of pounds and be a “gross misuse of taxpayers’ money”.

Here’s the full story:

Production growth at US factories accelerated last month as client demand increased, two surveys have shown.

But firms also reported significant supply chain disruption, backlogs of work, and problems hiring staff.

IHS Markit’s US manufacturing PMI has come in at 62.1 in May, up from 60.5 in April, and above the earlier ‘flash’ estimate of 61.5. That shows rapid growth – as we’ve seen in the UK and eurozone already today.

The PMI survey found that:

• Output expanded at faster rate as growth in new order inflows strengthens
• Supply chain disruption lead to soaring cost pressures
• Backlogs of work rose at quickest pace on record

New orders increased at the fastest pace since the survey began in 2007, lifted by both domestic and foreign client demand. This upturn was often linked to the loosening of Covid-19 restrictions and successful vaccine rollouts, which led to stronger demand conditions.

But cost pressures surged, leading manufacturers to lift their own prices at the fastest rate in the survey’s 14-year history.

The rate of job creation slowed to the softest since December 2020, with some companies reporting problems finding suitable staff to fill vacancies.

Chris Williamson, chief business economist at IHS Markit, said:

US manufacturers are enjoying a bumper second quarter, with the PMI hitting a new high for the second month running in May.

Inflows of new orders are surging at a rate unsurpassed in 14 years of survey history, buoyed by reviving domestic demand and record export sales as economies reopen from Covid-19 restrictions. However, elevated levels of other survey indicators are less welcome: prices charged by manufacturers are also rising at an unprecedented rate, linked to soaring input costs and unparalleled capacity constraints.

Not only is operating capacity being curbed by record supply chain delays so far in the second quarter, but firms have also been increasingly unable to hire sufficient staff. Hence backlogs of work are building up at an unprecedented rate, as firms struggle to meet demand.

The Institute of Supply Management’s manufacturing PMI survey tells a very similar picture.

It jumped to 61.2 in May, from April’s 60.7 - again showing rapid growth, but with work backlogs rising and firms struggling to find staff.

The key points are:

• New Orders, Production & Employment Growing;
• Supplier Deliveries Slowing at Faster Rate;
• Backlog Growing (continuing at a record high)
• Raw Materials Inventories Growing;
• Customers’ Inventories Too Low (at an all-time low)
• Prices Increasing;
• Exports and Imports Growing

ISM’s Employment Index expanded for the sixth straight month, but panelists continue to note significant difficulties in attracting and retaining staff, at their own companies and at suppliers.

US crude price are rallying too, hitting their highest levels since October 2018.

Predictions that the oil market is tightening this summer are driving crude prices up, Bloomberg says:

US crude futures climbed to the highest in more than two-and-a-half years after the OPEC+ alliance forecast a tightening global market, while international efforts to revive a nuclear deal with Iran were yet to reach a breakthrough.

West Texas Intermediate rose as much as 3.2% from Friday’s close to $68.42 a barrel, while global benchmark Brent topped $70, a level it has failed to hold for a sustained period since 2019.

The oil glut built up during the coronavirus pandemic has almost gone and stockpiles will slide rapidly in the second half of the year, according to an assessment of the market from an OPEC+ committee. A ministerial group is gathering in Vienna, before a full meeting that is expected to ratify a scheduled output increase for July.

Brent crude has hit its highest level in almost three months, as oil ministers from Opec countries and their allies prepare to decide whether to lift production.

Brent is up over 2% today, hitting $71 per barrel for the first time since early March.

The Opec+ group, led by Saudi Arabia and Russia, are expected to stick to their plan of gradually relaxing supply curbs, as they await to see whether Iran’s production increases (if a nuclear deal with the US is agreed).

Factory data from China earlier today, showing the fastest growth this year, is also positive for oil demand, as are the record manufacturing PMI readings from the eurozone and UK this morning.

Olaf van den Heuvel, CIO at Aegon AM NL, expects OPEC will attempt to stabilise oil prices as spare capacity responds to rising demand, rather than boost supply too fast and risk another price war.

Commodity prices are in the spotlight because of rising inflation. Economies are reopening, so the demand for oil is increasing. However, expected oil demand in 2021 is still about five million barrels per day below 2019 levels. During the Covid-19 crisis, OPEC and other major oil producing countries such as Russia absorbed the drop in demand for crude oil by significantly reducing production. This removed 10% of supply from the market.

In recent months production has slowly resumed. There are still over nine million barrels per day of spare capacity though. We expect OPEC will opt for a cautious approach to keep the market in balance. Above all it will be afraid of flooding the market with crude oil too soon. We saw confirmation of this earlier in the year when Saudi Arabia offered to unilaterally cut production by an additional one million barrels per day. That being said, in April it decided to increase production by 2.1m barrels per day from May to July in anticipation of a pick-up in global economic growth.

It will remain cautious however, thanks to other areas where supply could yet rebound beyond its control. This includes Iran, which is currently producing two million barrels of oil per day but could reach toward 6.5m if a new nuclear deal is agreed with the US.

The US itself could also up its capacity as prices rise and shale oil producers come back into play. OPEC will be wary of restarting a price war with those producers that ended so badly for them in 2014 and 2015.

Inflation across the eurozone has accelerated above the European Central Bank’s target, as rising prices hit consumers.

The annual eurozone consumer prices index rose by 2% in May, flash data shows, up from 1.6% in April.

Energy prices were the biggest factor, surging by 13.1% over the last year (as crude prices recover from their slump early in the pandemic).

Service sector firms also raised their prices, with annual services inflation rising to 1.1% from 0.9% in April, while non-energy industrial goods rose 0.7% and food, alcohol & tobacco were 0.6% higher than a year ago.

This takes inflation above the ECB’s inflation target of ‘close to, but below 2%’, and could intensify pressure from more hawkish policymakers to slow its pandemic bond-buying stimulus programme.

Eurostat has also reported that unemployment across the eurozone fell in April, to 8.0% from 8.1% in March.

However, that’s still higher than a year ago (it was 7.3% in April 2020), due to the heavy job losses caused by Covid-19. That shows that the economic damage of the pandemic has yet to heal (especially with the eurozone falling into recession last quarter).

It adds:

Eurostat estimates that 15.380 million men and women in the EU, of whom 13.030 million in the euro area, were unemployed in April 2021. Compared with March 2021, the number of persons unemployed decreased by 165 000 in the EU and by 134 000 in the euro area.

Compared with April 2020, unemployment rose by 1.406 million in the EU and by 1.275 million in the euro area.

A surge of new orders has helped Britain’s factory sector to post a record increase in activity last month, as the easing of lockdown restrictions boosted demand.

The UK Manufacturing PMI jumped to 65.6 in May, up from 60.9 in April, and the highest since the survey began in 1992 (any reading over 50 shows growth).

IHS Markit, which compiles the survey, reports that conditions in the manufacturing sector improved at an unprecedented rate in May. Output growth strengthened, and new orders rose at the quickest pace on record.

Markit says:

Companies linked new order growth to rising business confidence, the further re-opening of the UK economy and reduced issues relating to Covid-19.

New export orders also rose at a survey-record pace in May, amid reports of stronger demand from the EU, the US and China. But while large companies saw record gains in new export work, small firms only saw a smaller rise.

Employment jumped at a record pace, with manufacturers taking on staff to handle high levels of pent-up demand.

Supply disruption was a growing problem too, with companies reporting shortages of electronics, plastics and metals, transport delays and higher demand for raw materials.

This drove up input costs at a record pace, leading to an unprecedented rise in output prices too, in a further sign that inflationary pressures are building.

Rob Dobson, director at IHS Markit, said UK factories benefited from the easing of lockdown restrictions, as vaccine rollouts help economies unlock.

But he also warns that consumers will see higher prices, as the jump in input costs is passed on.

The UK PMI surged to an unprecedented high in May, as record growth of new orders and employment supported one of the steepest increases in production volumes in the near 30-year survey history.

Growth is being boosted by the unlocking of economies from Covid restrictions and ongoing vaccination programs. This is being felt across the globe, as highlighted by a record rise in new export business during the latest survey month.

The corollaries of this strong upsurge in industrial activity are increased strain on supply chains and a build-up of price pressures. Supplies of inputs into manufacturers and finished goods on to clients are both being severely disrupted by raw material shortages, port issues, Covid restrictions, post-Brexit difficulties and market forces as demand outstrips supply.

Suppliers’ delivery times subsequently lengthened to one of the greatest extents on record, while input costs and selling prices both rose at unprecedented rates. With little sign of supply pressures receding, these price rises will become more visible to consumers.

Domino’s Pizza is aiming to hire 5,000 chefs and delivery drivers, as consumers’ appetite for takeaways remains strong, at a time when the hospitality industry is battling staff shortages.

Britain’s biggest pizza delivery chain said it had recruited just over 8,000 people in 2020 to meet demand, including hairdressers, taxi drivers and event managers who were not able to work as usual during lockdown.

However, as Covid restrictions ease, some of Domino’s pandemic recruits are returning to their previous roles.

As a result, the chain needs more staff for its 1,100 UK branches, most of which are run by franchisees. The firm has previously announced plans to open a further 200 outlets.

Domino’s search for new employees comes amid warnings from the hospitality industry that it is facing a staffing crisis, with businesses trying to fill thousands of vacancies.

Domino’s was “overwhelmed by the response from people of all walks of life” during last year’s recruitment drive, said Nicola Frampton, operations director at Domino’s UK.

Frampton added.

I’m proud we were able to play a part by offering people the opportunity to continue working and earning when times were tough. But as people start to reunite, customer demand is showing no signs of slowing and so we’re now looking for 5,000 new recruits.

Here’s the full story:

The UK sub-prime lender Amigo is facing insolvency after the high court rejected a controversial rescue plan last week.

Amigo told the City this morning that it will not appeal against the court’s ruling, which concluded that its proposal to cut compensation payouts to customers for mis-selling loans was unfair.

Amigo added that its board are considering all options, including insolvency, saying:

The Board of Amigo continues to consider all options, which includes insolvency, and whether it might be possible and appropriate, given the cost of a scheme, to promote another scheme of arrangement to avoid insolvency.

The UK’s financial watchdog, the FCA, opposed the original scheme of arrangement proposed by Amigo, which charges 49.9% interest and requires borrowers to provide a friend or family member to act as a guarantor for a loan.

Under the plan, the compensation pool for those missold loans was capped while directors could earn £7m in long-term bonuses.

Gary Jennison, chief executive officer of Amigo, said today:

Without a scheme, Amigo faces insolvency as it will be unable to satisfy its customer compensation claims as well as meeting the legally binding funding obligations owed to its secured creditors.

The Board is committed to finding the best solution it can for Amigo’s customers and other stakeholders and will be working with its stakeholders, including the FCA, to achieve that solution as quickly as it can.

Amigo shares are down 8% this morning at around 7.6p, near to its record lows, having halved last week after the court ruling.

It floated on the stock market in 2018 at 275p...

The FTSE 100 index has jumped 1% this morning, amid hopes of a strong recovery from the pandemic.

The blue-chip FTSE 100 index is currently up 75 points to 7,097, near to the pandemic highs hit last month, with almost every stock gaining ground.

Mining companies are leading the risers, with iron ore jumping today amid reports that China could be relaxing recent restrictions on steelmakers in its Tangshan region.

The weaker dollar is also pushing up commodity prices, boosting Anglo American (+4.5%), Rio Tinto (+4%), Glencore (+3.4%) and BHP Group (+3.4%).

Housebuilders such as Persimmon (+2.4%), Barratt Development (+1.7%) and Taylor Wimpey (+1.2%) are also rallying, after Nationwide reported that house prices jumped sharply again in May.

AJ Bell financial analyst Danni Hewson says:

Robust figures from the housing market lifted the housebuilding sector while miners were in demand as commodity prices resumed an upwards trajectory.

The FTSE’s rise was all the more impressive when you consider it came against the backdrop of a recovery-inspired rally in sterling. A strong pound dulls the relative worth of the overseas earnings which dominate the index.

In the financial markets, sterling has hit its highest level against the US dollar in three years.

The pound traded as high as $1.4248 early this morning, its highest level since April 2018 (which was the highest since the 2016 EU referendum).

This rally comes despite concerns about a potential third wave of Covid-19, due to rising cases of the new variant, called B.1.617.2,

Bloomberg reports that traders are betting that the UK’s fast vaccine rollout will help the recovery gain traction:

“The pound is favoured because the progress of vaccination puts the UK closer to economic normalisation than other countries,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow, in Tokyo.

Sterling could climb toward $1.45.

Economic optimism has also lifted sterling recently, with consumer confidence strengthening, retail sales rising and company output picking up as lockdown restrictions were eased.

Yesterday, the OECD predicted that the UK economy would expand by 7.2% this year, a strong bounceback, which would be the fastest since 1941.

The dollar, though, has been pushed down by the huge US stimulus spending packages and the Federal Reserve’s pledge not to tighten monetary policy until it sees more progress on unemployment.

Last week it hit a three-year low against China’s yuan, despite Beijing’s efforts to avoid its currency strengthening too quickly (which could hit export growth).

The shortage of larger, more rural houses on the market is helping to push up prices strongly, says Nicky Stevenson, managing director at national estate agent group Fine & Country:

Many current buyers are those who delayed a move last year and would have been forgiven for thinking that competition would have cooled by now. Instead, they find themselves in an even tighter race as demand continues to outstrip supply. The buyers driving the market higher are still those looking for more space. Forever homes are still the order of the day and buyers are more than willing to do everything in their power to secure what they truly desire.

There just aren’t enough of these larger properties coming on to the market in the right areas and there’s no sign this imbalance is going to resolve itself in time to suppress strong growth over the summer.

But Guy Harrington, CEO of residential lender Glenhawk, predicts that the pace of growth will slow, especially if a third wave of Covid-19 cases hits the UK.

The disconnect between the UK housing market and economic reality appears as great as ever. Government stimulus has created a false sense of consumer confidence.

Iain McKenzie, CEO of The Guild of Property Professionals, says there’s a ‘frenzy’ in the housing market, with some buyers bolstered by lockdown savings:

At a time when much of the country seems to be enjoying a sense of normality once again, we would expect the property market to follow suit. Today’s figures show that the market didn’t get the memo.

The frenzy to snap up a property at the tail end of a pandemic is showing no signs of stopping, with double-digit growth in house prices throughout May – the highest we have seen in the best part of a decade.

The success of the stamp duty holiday has certainly played its part, as well as the savings many have made while working from home.

With a record-breaking new average house price, which has grown almost £24,000 over the past 12 months, it’s worth thinking about how your potential savings might not outweigh the inflated price of your new home.

It is still crucial that prospective buyers go into the process with a sound understanding of the market and what they want from a new property.

As demand in the market increases, the extra competition creates a fear of missing out that can distract buyers from the fundamentals. It’s important not to let the current property frenzy draw attention away from what you are really looking for.

Nationwide also predicts that house prices could “accelerate further” in the coming months.

The ‘race for space’, record low interest rates, and the stamp duty holiday (which will fall from £500,000 to £250,000 at the end of June, and finish three months later) could all drive activity, making it even harder for first-time buyers to get onto the housing ladder.

But the market could then slow, if the end of the furlough scheme pushed up unemployment.

Chief economist Robert Gardner explains:

“Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs, improving credit availability and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.

“With the stock of homes on the market constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.

Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK housing boom continues to run, with house price inflation accelerating again as the pandemic spurs people to move to larger properties in more rural areas.

Figures released by Nationwide this morning show that annual house price growth jumped to 10.9% in May, up from 7.1%/year in April, pushing the new average price to a new peak.

It says:

• Annual house price growth rises to 10.9%, the highest level in nearly seven years
• Prices up 1.8% month-on-month, following a 2.3% rise in April
• New record average price of £242,832, up £23,930 over the past twelve months

Robert Gardner, Nationwide’s chief economist, says the housing market has seen a “complete turnaround over the past twelve months” since the first lockdown temporarily froze the market, with transactions reaching a record high of 183,000 in March:

Gardner adds that Nationwide’s research shows that pressure for more space, or a garden, is the primary factor driving the market this spring.

“Amongst homeowners surveyed at the end of April that were either moving home or considering a move, more than two thirds (68%) said this would have been the case even if the stamp duty holiday had not been extended.

It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.

Nationwide says the ‘race for space’ continues to drive demand. Of those moving or considering a move, around a third (33%) were looking to move to a different area, while nearly 30% were doing so to access a garden or outdoor space more easily, according to an online survey of consumers.

Gardner adds:

“Over a third (36%) of those surveyed said they were more likely to consider enhancing their home as a result of Covid19, with nearly half (46%) of these looking to add or maximise space.

Faster broadband was another factor, with the move to home working and home schooling during lockdown showing the value of a good web connection.

Nationwide’s results will interest the Bank of England, which is carefully monitoring Britain’s booming housing market as it weighs up the possibility that a rapid recovery from the Covid-19 pandemic will lead to a sustained period of inflation.

In an interview with the Guardian today, deputy governor Sir Dave Ramsden said the Bank expected price pressures to be temporary but he and his colleagues on Threadneedle Street’s monetary policy committee were aware of the risks.

Ramsden, the deputy governor responsible for markets and banking, said:

“There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure. That’s something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators.”

Also coming up today

Surveys of factory purchasing managers in the eurozone, UK and US are expected to show strong growth last month, and squeezed supply chains pushing up prices.

Oil ministers from the Opec+ group will hold a video call today to assess the latest developments in the global markets.

They’re expected to stick to the existing pace of gradually easing oil supply curbs, as demand picks up -- which has already pushed UK petrol prices up for six months in a row. Crude prices have risen overnight, with Brent crude rising over $70 per barrel.

The agenda

• Today: OPEC and non-OPEC ministers Ministerial Meeting
• 9am BST: Eurozone manufacturing PMI for May
  
• 9.30am BST: UK manufacturing PMI for May
• 10am BST: Flash reading of eurozone inflation in May
• 1.30pm BST: Canada’s Q1 GDP report
• 3pm BST: US manufacturing PMI for May