Lending in the UK rose at the fastest pace in more than 4 and a half years in September, which coupled with the latest GDP figures showing a rise of 1 percent could be a sign of the economy picking up after finally exiting recession.
According to figures published by the Bank of England yesterday (October 29th 2012), consumer credit rose by £1.2bn last month, the strongest rise since February 2008, driven by a £893m increase in overdrafts and loans.
Mortgage approvals also rose to 50,024 in September, from 47,921 in August, beating forecasts of 48.500, although mortgage approvals were still 6 percent down on the year, while mortgage lending also rose by £491m, which also exceeded expectation.
However, this is a very gradual recovery and according to the Bank, economic growth will be “materially lower” in the fourth quarter and will remain week for the next couple of years, as the third quarter’s boost was due to the one-off effect of the Olympic Games.
On the other hand, the Bank’s preferred gauge of money supply, M4, which excludes transactions between other financial corporations, rose 0.3 percent in September, after a 0.5 percent increase in August, taking the annual growth rate to 4.2 percent.
The figures will presumably give hope to the Bank that the economic recovery is now sustainable and will add fuel to the debate on further quantitative easing which will be discussed at the next Monetary Policy Committee (MPC) meeting next week.
The MPC will also discuss whether or not the Funding for Lending Scheme (FLS), which gives banks cheap loans for them to pass on to consumers, has been effective, although since FLS only started in August, it may be too early to tell.
As an accountant, Sarah Jenkins, specialises in management accounting, business development and financial reporting.