< p>When assessing economic and broader market data, it's important to understand that good news isn't necessarily good news. Look at the Nationwide house price data out earlier this week. House prices were up by 0.3% in February we were told. But everyone knows that the sole reason for this surprise positive growth is seller intransigence, not the organic improvement of the market. Likewise, the Bank of England also came out this week and said that mortgage approvals were up in January relative to December. But when you look at the near-Arctic conditions of December this is hardly surprising. Dig a little deeper and January lending levels for house purchases were still below the six-month average - and still very low historically. The mainstream mortgage market, unlike the bridging market, is at best subdued. The Nationwide hit the nail on the head when they said the property market is treading water at present. That's a good way to put it. The market is very unsure of its direction and is just bumping along at or around its current price point. But this may not last for long. Two factors are set to have a decisive influence on the direction of the property market in the weeks and months ahead: inflation, which will potentially force the Bank of England to raise interest rates, and the performance of the economy during Q1 of this year. Both are equally important. If the increasingly hawkish Monetary Policy Committee raises Bank Rate too much too soon to force down inflation, property prices could unravel at a rate of knots as highly stretched homeowners are forced to sell and demand weakens due to increased borrowing costs. Forecasters are counting the hours to see the next set of minutes. But even more eyes, arguably, will be on GDP during the first quarter. It's hard to read too much into the performance of the economy during the final quarter of 2010, as the extreme weather conditions genuinely inhibited activity and demand. Even though the second estimate of Q4 GDP showed a further downward revision, to -0.6%, there is still a feeling in the markets that this is an anomaly and that Q1 is likely to show positive growth - and be a more accurate reflection of the health of the economy. Make no bones about it, this is important stuff and we are in a critical period for the UK economy and property market as a whole - perhaps the most critical period for the past 20 or so years. What happens if Q4 wasn't an anomaly but simply a true reflection of where the UK economy is at, as Q1 GDP also turns out negative, plunging us back into recession? What happens if sharp rate rises come shortly after this announcement to combat sharply rising inflation? We could experience a perfect storm for the UK economy and property market. Of course, it may not happen like this. If Q1 GDP rebounds and shows that the economy isn't in as bad a state as Q4 suggested, consumer and business confidence will return - and potentially quite strongly. Likewise, inflation could actually top out at its current level. And maybe unemployment won't rise as much as some suspect, as the private sector begins to strengthen. Maybe, just maybe. But let's not idly speculate. Come the end of April we'll know the Q1 GDP figure. And then we'll know a lot more about where the economy - and property market - are headed next.