Surge in lending and spending

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Fresh signs that consumer confidence is picking up are expected this week from figures on March mortgage lending due today and retail sales on Thursday.

Following last week's run of good news, which gave the Government hope that the economic tide will turn in its favour in good time for the general election, further buoyancy could help shares in London set fresh records.

"Perky figures this week will help keep the FT-SE going up," said Bob Semple, UK equity strategist at NatWest Markets.

Building societies and big banks are expected today to report an increase in mortgage loans following other signs of life in the housing market. House prices have started to climb, and estate agents have reported a noticeable increase in numbers of customers.

New figures released this morning show a further surge in spending on debit and credit cards last month. Spending on plastic grew 23.4 per cent in the year to March, when it topped pounds 6bn for the first month.

Debit card spending expanded by a third during the year to March. Credit card spending grew 16.8 per cent, the highest since last July, according to the Credit Card Research Group. Elizabeth Phillips, director of the group, said: "Although the increase was probably inflated by pre-Easter shopping, it seems clear that consumers are regaining their confidence."

Use of plastic cards at high street retailers was particularly strong, growing 27 per cent in the 12 months to March, with growth spread evenly among different types of store.

The recent surge follows a 19 per cent rise in the amount spent using debit and credit cards in 1995, or 15 per cent on credit cards and 26 per cent on debit cards. Debit cards are expected to overtake credit cards by the year 2000 if they keep up the current pace of growth.

Credit card borrowing has grown signifantly faster than spending. It was up 17 per cent, compared with 8 per cent growth in 1994. It was the first time since 1991 - before the recession - that card holders increased their borrowing faster than their spending.

Lloyd's Bank economists predict in a report today that consumer spending will grow faster this year than at any time since the 1989 boom.

The Labour Party attempted to burst the bubble by focusing on new figures from Dun & Bradstreet showing an increase in business failures of 15 per cent in the year to the first quarter of 1996.