The London market was already shaky when the figures were released in mid-morning, depressed by another sharp fall on the Tokyo Stock Exchange.
The amount owed by consumers to finance houses, on bank credit cards and on non-mortgage loans from building societies fell by pounds 135m in June to pounds 29.9bn, adjusting for normal seasonal changes. This was the tenth fall in the last 11 months and the largest since December. City economists had expected a fall of only pounds 25m in outstanding debt, slightly larger than May's decline of pounds 19m.
Nearly pounds 4bn was wiped off the value of London shares as the FT- SE index of 100 leading stocks closed 24.4 points lower on the day at 2,325.7, sliding without difficulty through the psychological barrier of 2,350.
For the first time the Central Statistical Office broke down the figures for the change in outstanding consumer credit into a net borrowing component and a measure of debt write-offs and revaluations. Previously, debt write-offs had been treated as a repayment.
The CSO estimated that consumers repaid a net pounds 55m of debt in June, after five months in which they borrowed more than they repaid. The remaining pounds 80m of the fall in the outstanding credit total was the result of revaluation or write-offs. In May consumers borrowed a net pounds 68m, which was more than offset by write-offs and revaluations of pounds 87m.
Analysts said the write-offs figure should be treated with caution, as it was based on a projection of 1991 figures, adjusted according to the CSO's monthly survey of credit grantors.
For the first time since December, consumers repaid more debt on bank credit cards than they took on. Some pounds 2m of bank credit card debt was repaid in June, following net borrowing of pounds 94m in May. Repayment of finance house debt more than doubled between May and June to pounds 51m.
'People have not been as reluctant to borrow as we thought', Simon Briscoe, an economist at Midland Montagu, said. 'The figures show that things got sharply worse in June, but from a better than previously estimated base.' He added that further months of figures showing net debt repayment would be needed before it was clear that the economy had lurched downwards again.
More cheeringly, the amount of new credit advanced in June was nearly pounds 400m higher than in the previous month, at pounds 4.2bn, the highest figure for a year.
The fall in Tokyo share prices was also the result of economic worries. The Nikkei average fell below 15,000 for the first time in six years yesterday morning, but recovered to close 2.9 per cent lower on the day at 15,066.34. The Tokyo market is now more than 60 per cent lower than its 1989 high, with some analysts fearing that it may fall below 10,000.
Yesterday's share price falls in Tokyo also reflected fears that analysts may downgrade more of their profit forecasts.
The gloom on the Tokyo stock market weakened the yen, against which the dollar rose Y0.35 to Y128. The main beneficiary was the German mark, which rose slightly in the European exchange rate mechanism grid. Traders reported that the Bank of France was asking prices but did not intervene to support the franc.
The pound traded in a narrow range all day, closing unchanged against the mark at DM2.8267. It shed a tenth of a cent against the dollar, closing at dollars 1.9265.
Investors showed little enthusiasm for the dollar, but were afraid to sell it aggressively in case the Federal Reserve repeated Friday's intervention in its support.
The three-month interbank interest rate, which tracks City base rate expectations, closed unchanged at 103 16 per cent, almost discounting a full quarter-point rise in base rates from their current 10 per cent.
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