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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

UK data round up: consumer credit and mortgage approvals rise as money supply sinks

11:42 29 February 2024

Consumer credit was stronger than expected last month, and rose by £1.9bn, faster than the £1.5bn expected. Excluding last November, when consumer credit surged by £2.09bn, this is the largest monthly increase since 2017. Nearly half of the consumer credit increase was due to rising levels of credit card debt, which may be a sign of consumer confidence to take on more debt. The annual growth rate for consumer credit was 8.9%, the highest growth rate since 2018.

The UK’s consumer borrowing habits seem to be back to their pre-covid norms, suggesting that as pandemic era savings get run down, people are turning to credit to maintain spending levels. But how does the UK compare to other countries? In 2023, the US saw consumer credit growth slow. Household debt in Q4 2023, the last data available, rose by 1.2%, this included a $50bn increase in credit card debt over the quarter, which suggests that the growth rate in consumer credit growth is lower in the US than the UK.

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A rise in household debt is not necessarily a problem, and it can boost economic growth, however, it does give rise to concerns about delinquency rates. If lending rates are rising, then there is a chance that the delinquency rate may also rise.

In the US, delinquency rates for car loans and credit cards have been rising. The Federal Reserve reported that aggregate household delinquency rates were 3.1% in December, it also reported that approx. 8.5% of credit card balances and 7.7% of auto loans had transitioned into delinquency last quarter. Delinquency rates had surpassed pre pandemic levels, particularly for younger borrowers, according to the Federal Reserve, and the UK may follow a similar pattern, if consumer credit growth continues to rise at this pace.

Elsewhere, mortgage approvals picked up in January, rising by 55.2k, vs. 52k expected, adding to evidence that the UK housing market is receiving a boost in 2024. The money supply for January was also released. The M4 money supply, which includes all notes and coins in circulation and all sterling deposits, fell 0.1% in January, with the annual rate declining by 2.2%. This is the seventh consecutive month of money supply contraction. This is a sign of high interest rates, and typically it corresponds to weaker economic growth. Although the UK economy is in a technical recession, growth has been mostly flat, defying fears that higher interest rates, and a falling money supply, could lead to a deeper downturn. Perhaps, things are different in this economic cycle? Either way, the decline in the money supply at the start of the year is mildly dovish for UK interest rates.

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

Written by

Kathleen Brooks

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