The steady rise in house prices

The latest housing market figures, from the Office for National Statistics, confirm the buoyancy seen in recent mortgage lenders' surveys. National average house-price inflation is running at 3.3%, the strongest in six months. London prices are climbing by 10% year-on-year, and prices are up by 43% from their 2009 trough. Outside London the rise has slowed to 1.3%. Meanwhile, the annual rate of consumer price inflation (CPI) edged down to 2.7% in August from 2.8% the month before. However, retail price inflation (RPI), which includes housing costs, rose from 3.1% to 3.3%.

What the commentators said

Rising house prices bolster the feel-good factor, which in turn tends to underpin consumption. But consumers aren't suddenly going to go on a huge splurge. Not only are house prices not rising everywhere, but there has been a nasty squeeze on average earnings in the past five years: they have fallen by 7% in real terms, as Roger Bootle of Capital Economics pointed out.

With earnings growth still at just 1% year-on-year, the squeeze on real pay continues. "It doesn't matter how many indicators are trotted out to support claims that the economy is improving," said James Moore in The Independent. "The Chancellor will struggle to derive any personal credit from the electorate until they start feeling an improvement in their personal finances."

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Meanwhile, household balance sheets are still stretched. Consumers have worked their debt down to 145% of disposable income from 170% in 2008. But 145% is still higher than it was in any other G7 state at the height of the boom, noted Vicky Redwood of Capital Economics, so there is probably a bit more deleveraging to do.

In the meantime, households have been dipping into their savings to fund purchases. They are currently only saving 4% of their income. Given all this, said James Knightley of ING Financial Markets, the scope for consumption to rise significantly in the near future looks limited. With consumers comprising around 60% of GDP, that will keep a lid on overall growth too.