MIXED signals were sent out yesterday by the February credit figures.
The amount of new credit advanced to consumers exceeded #5000m for the
first time, but net lending rose only slightly and over the latest three
months it was lower than in the previous three.
The spending public do not seem to be reluctant to take on new credit,
but at the same time they are keen to pay off existing loans to prevent
their total indebtedness building up.
New credit advanced increased from #4740m in January to #5014m in
February with #196m of the rise showing up in higher lending on bank
credit cards.
Between the latest two three-monthly periods new credit increased by
3.6% to #14.7 billion. Finance house agreements rose by 8.8% to #5627m.
Net lending edged up from #235m in January to #277m in February,
disappointing City expectations of around #300m.
Net lending by finance houses increased from #255m to #283m, but there
was no change in the amount outstanding on bank credit cards and a
repayment of #6m to building societies.
In the latest three months net lending of #937m was 13% lower than in
the previous three months, causing some economists and statisticians to
suggest that the figures indicated a slowdown in consumer confidence
ahead of this month's tax increases.
A more significant statistic may be that net lending in the latest
three months was 180% higher than in the same three months a year ago.
Bank of America's Jeremy Hawkins sought to get round the
contradictions in the figures by saying: ''Nothing in the data indicates
the sort of decline in consumer confidence that could jeopardise
recovery prospects, but current lending levels are low enough to favour
another cut in interest rates.''
It is doubtful, however, if the monetary authorities at the Treasury
and the Bank of England would see it that way, certainly not without
other strong supporting evidence.
Another cut in interest rates is much more likely to be triggered by
good news on the inflation front. Economists at City stockbroker James
Capel are expecting some improvement in the inflation profile on Friday
when the headline rate is forecast to drop from 2.4% in February to 2.3%
in March and the underlying rate, which excludes mortgage interest
payments, from 2.8% to 2.4%.
Meanwhile there could be a further easing in German interest rates
this week when the Bundesbank council meets on Thursday after its Easter
break. Market talk in Frankfurt is that the Lombard rate will be cut
from 6.75% to 6.25% and there is some speculation that the more
important discount rate could also be reduced from its present 5.25%.
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