ECONOMIC OUTLOOK
CONFIDENCE among UK consumers is gradually falling away, according to a widely-watched index produced by Gfk.
It fell by one point in October to -10, but the “major purchase” index rose by two points – its third monthly rise in a row.
It may be that consumers are making the most of record low interest rates to make these purchases while they still can, because data released on Monday by the Bank of England showed lending to consumers continued to grow at annual rate of nearly 10% in September.
Consumer credit increased by a net £1.6bn over the month, underlining how British consumers are still borrowing even as fears grow of a slowdown in household spending.
Other data released last week by UK Finance – formerly the British Bankers’ Association and UK Cards Association – showed credit card borrowing from banks was up 5.5% over the year.
UK Finance also reported that savings balances at the big banks grew at their slowest rate since the financial crisis, with many customers making withdrawals from their ISA accounts. Total cash ISA balances fell by £900million in September, the fifth monthly fall in a row.
Samuel Tombs, of Pantheon Macroeconomics, warned: “Looking ahead, credit will likely drag on growth in households’ spending.
“The fall in consumer confidence over the summer points to a pull-back in spending on bigticket items ahead.”
Retail sales fell in October at their fastest rate since 2009, according to the CBI’s latest distributive trades survey.
Half of the retailers surveyed reported that sales volumes fell in October compared to a year ago, with just 15% saying sales had increased – a net balance of minus 36%. Department stores, specialist food and drink retailers and motor traders said their sales were down.
By contrast, in the September CBI survey a positive balance of 42% of retailers reported sales growth.
Meanwhile, preliminary data for the UK economy showed quarterly growth of 0.4% in the three months to September, up from 0.3% in both the first and second quarters of the year.
The slightly higher-thanexpected figure from the Office for National Statistics was seen as increasing the chance that the Bank of England will raise interest rates tomorrow.
The UK’s annual growth rate was 1.5% in the third quarter, according to the ONS.
However, the construction sector contracted for its second successive quarter, putting it technically in recession.
The British Chambers of Commerce noted that economic growth over the first half of this year was the weakest since late 2012, and said the UK remains on a “low growth trajectory”.