Increased borrowing drives shopper spending
Friday 25 April 2014
Shoppers are increasingly turning to borrowed cash after the first growth in overdrafts and personal loans for five years, figures showed today.
Rising confidence in economic fortunes triggered healthier than expected retail sales in March as volumes rose 0.1% on the month, beating City forecasts as clothing and footwear did well, according to the Office for National Statistics. Sales are up 4.2% in annual terms, partly reflecting a bitterly cold March last year.
But figures from the British Bankers’ Association for March also revealed the first annual growth in personal loans and overdrafts since January 2009, as consumers begin to throw off some of their previous caution, house prices rise and inflation recedes.
BBA chief economist Richard Woolhouse said: “Confidence is clearly picking up as more people seek to borrow from their bank to fund new purchases.”
Retail figures showed 0.8% growth over the first quarter. Retail accounts for 22% of the economy, so should add almost 0.2 percentage points to wider growth. Official estimates are due on Tuesday but the Bank of England forecasted growth as high as 1% this week.
Chris Williamson, chief economist at financial data provider Markit, said: “There is a fundamental improvement in household finances under way which should help drive further ongoing growth.
“The improving job market, and rising wages, combined with lower inflation are helping boost consumer spirits and starting to reverse the squeeze on real incomes.”
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