The association's monthly figures on lending by its members showed a fall in total credit advanced in November, to £2.58bn from £2.6bn the previous month. Consumer credit increased but this was more than offset by a fall in business and motor finance.
David Hardisty, chairman of the FLA, said: ``Credit, particularly short-term credit on store cards, is seen as a convenient, cost-effective alternative to cash, not a method of spending more.''
Total consumer credit advanced by FLA members, who provide most of the consumer finance beyond bank and building society loans, was £1.5bn in November, 30 per cent higher than a year earlier.
This rate of growth was slower than that seen earlier in the year, diminished by weak sales at the car showrooms.
Loans for new cars were 17 per cent lower than a year earlier, at £220m, while those for used cars were 19 per cent higher at £259m. The combined effect was a small fall in lending for car purchase in the 12 months to November. Both components declined during the month. Finance for new cars fell by 8 per cent and for used cars by 2 per cent.
Businesses borrowed more for car leasing and hire purchase. The total business motor finance market expanded by 14 per cent in the year to November and by 3 per cent in the month.
The real disappointment in the figures, according to the FLA, was lending to businesses for other purposes. Although business financing in the three months to November was £3.8bn - 8 per cent higher than in the same three months in 1993 - it would normally be growing faster by this stage of the recovery.
Mr Hardisty said: ``The growth in finance provided to small and medium-sized businesses for plant and machinery is still disappointing. This is a key indicator of economic health and we would have expected it to be performing better by now.''
Some economists believe competitive pressures in retailing mean forecasts that base rates will reach 7.5 per cent this year are exaggerated.
David Kern, chief economist at National Westminster Bank, said: ``There will have to be difficult choices as to whether, and when, the tightening process must be stopped.''
Mr Kern said the contrast between booming exports and weak house prices and consumer spending made the timing difficult, but fears of sharp increases in interest rates were overdone.Reuse content