Consumer credit flat – money supply falls

| November 30, 2011
Consumer credit flat - money supply falls

The economic crisis is making consumers wary of taking on more debt, according to the latest figures from the Bank of England.

The amount of consumer credit totalled £0.9 billion in October, the same as for the previous month, and only slightly higher than the six month average of £0.8 billion, suggesting that pressure on High Street sales will continue.

The Bank’s latest data also revealed a 0.3 per cent fall in the M4 measure of money supply in October, compared with the previous month.

This includes notes and coins in circulation, bank deposits and bonds.

On a year-on-year basis money supply fell 2.7 per cent, representing the biggest annual fall since records began in 1983.

Although total lending to individuals increased by £1.3 billion in October, this was almost entirely due to an increase in home loans.

Credit card lending increased by just £0.1 billion during the month while loans and advances remained roughly the same.

The Bank announced an increase in mortgage approvals from 51,193 in September to 52,743 in October, a greater-than-expected increase, although the outlook for the housing market remains uncertain given the current economic climate.

Analysts suggest that the continuing high level of inflations, pressure on wages and the government’s austerity measures will lead to an increase in the number of consumers being forced to borrow to help finance their spending.

Earlier this month FICO revealed that consumers are paying back less of the balance they owe on credit cards than at any time over the past two years, while the number of people using credit cards to withdraw cash has increased to its highest ever level.

FICO’s research was based on classic credit card accounts taken out over the last five years.

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