U.K. card debt continues to descend as Brits worry about the economic chaos over the uncertain impact of Brexit. Overall the annual growth rate of total U.K. consumer credit in July slowed to its lowest growth since April 2014. Meanwhile, overall consumer credit is now expanding by half the annual rate of just two years ago.
According to figures released by the Bank of England (BOE), U.K. consumer credit card lending settled at £72.4 billion for a 5.3% YOY (year-on-year) gain in July, compared to a revised £72.9 billion or a 5.1% YOY gain in June, and compared to a revised £72.9 billion for a 5.5% YOY increase for May 2019. One-year ago U.K. consumer credit card lending settled at £72.0 billion, increasing 8.9% annually.
U.K. July Consumer Lending
U.K. other consumer loans, advances posted at £145.6 billion for a 5.6% YOY gain in July, compared to a revised £145.3 billion for a 5.7% YOY gain in June, and compared to a revised £144.6 billion for a 5.7% YOY increase for May 2019. One-year ago U.K. other consumer lending settled at £145.3 billion, growing 8.2% annually
U.K. total consumer credit reported at £218.0 billion for a 5.2% YOY gain in July, compared to a revised £218.2 billion or a 5.5% YOY gain in June, and compared to a revised £217.5 billion for a 5.7% YOY increase for May 2019. One-year ago U.K. total consumer credit card lending settled at £213.5 billion for an 8.5% YOY gain, according to figures compiled by CardData.
The BOE noted the extra amount borrowed by consumers in order to buy goods and services was £0.9 billion in July. This was broadly in line with the £1.0 billion average over the past 12 months, but below the £1.5 billion average from January 2016 to June 2018. Within the July figure, the extra amount borrowed for other loans and advances fell on the month to £0.6 billion, while net credit card borrowing remained stable.
The annual growth rate of consumer credit remained at 5.5% in July, markedly lower than its peak of 10.9% in November 2016. This slowing reflects the weaker monthly lending flows over most of the past year.
In April 2017, credit card debt was growing at a 9.7% clip, while total consumer credit grew at an annual rate of 10.8%, according to analysis by RAM Research.
Note: Lending to individuals is split between lending secured on dwellings (mortgages) and consumer credit. Consumer credit is further split between credit card debt and other loans and advances. Student loans are excluded.
The chances the U.K. will exit the EU On October 31st are becoming more remote each day as the government bickering and power plays have taken center stage, says Robert McKinley, Senior Analyst for CardFlash, CardData, and CardTrak.
U.K. July Consumer Spending
The British Retail Sales Index from the Office for National Statistics reports in the period between May and July retail sales increased by 0.5% when compared with the previous three months, with food stores and fuel stores seeing a decline. The quantity bought in July 2019 increased by 0.2% when compared with the previous month, with strong growth of 6.9% in non-store retailing.
Department stores’ growth increased for the first time this year with a month-on-month growth of 1.6%; this was following six consecutive months of decline. Year-on-year growth in the quantity bought increased by 3.3% in July 2019, with food stores being the only main sector reporting a fall at negative 0.5%.
The Office for National Statistics also reports in July 2019, online retailing accounted for 19.9% of total retailing compared with 18.9% in June 2019, with an overall growth of 12.7% when compared with the same month a year earlier.
U.K. August Consumer Confidence
The GfK Consumer Confidence Index for the U.K. fell 3 points from a month earlier to -14 in August 2019, below market consensus of -12. It was a seven-month low with all five measures declining, as growth concerns and domestic policy uncertainty mainly over Brexit continue to weigh on sentiment.
The measure for the country’s general economic situation during the last 12 months dropped 2 points this month to -34, whereas expectations for the general economic situation over the next 12 months fell 6 points to -38. Also, the gauge for personal fiances over the last 12 months declined 2 points to -1 and that for personal finances over the next 12 months slumped 5 points to 2. The big purchases climate sub-index went down 3 points to 1.
GfK Strategy Director Joe Staton says U.K. consumers continue to remain concerned about the wider economy, over which the woman or man in the street has no control, of greater worry are the falls in the measures for personal finance. These better reflect our hopes and fears for our everyday financial futures and this, coupled with a decline in the Major Purchase Index, could point to a turbulent time for the economy over the summer months.
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