Lending figures up as sterling stumbles
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Your support makes all the difference.NET lending to consumers rose by a greater-than-expected pounds 56m in December, but much of the increase appeared to reflect lending by finance houses to fund the recent surge in car sales.
The rise in credit was announced as sterling stumbled unexpectedly, indicating that last week's cut in German rates had done nothing to underpin the UK currency.
The pound fell by 2 pfennigs to finish at DM2.3795 but was more than 2.5 pfennigs below its best level in the day. Against a trade- weighted basket of currencies, the pound shed 0.5 points to stand at 77.2 per cent of its 1985 value.
The increase in net lending last month follows a meagre advance of pounds 13m in November. But a sharp increase in lending by finance houses, of pounds 95m, was offset by a pounds 43m repayment of credit card debt, suggesting that consumer spending was less than robust in December.
Net consumer credit outstanding at the end of December, which takes into account bad debts written off, fell by pounds 62m, to pounds 29.557bn, as some pounds 118m of debts were written off during that month. This is the fifth successive month in which the figure has fallen.
In the three months to December, net lending to consumers climbed by pounds 136m, compared with a repayment of pounds 11m in the previous quarter.
The amount of gross new credit advanced to consumers, which does not take account of debt repayments, rose sharply to pounds 4.67bn in December from pounds 4.07bn in the previous month.
The latest fall in sterling came despite widespread hopes that the pound would enjoy a brief respite after the Bundesbank cut its key lending rates by a quarter of a point last Thursday.
Analysts said the conviction that the Government is shortly going to cut interest rates at least one further percentage point, to 5 per cent, has become entrenched in financial markets, despite the Treasury's efforts to dispel such ideas.
These hopes are in the face of expectations that official figures today and on Friday are likely to point to upward pressures on prices.
A sharp monthly increase in factory gate prices, of perhaps as much as 1 per cent, is expected to be announced today, reflecting the fact that January is a traditional time for manufacturers to increase their list prices.
On Friday, the Retail Price Index is set to show headline inflation in January easing towards 2.3 per cent from 2.6 per cent, but the underlying rate is set to rise.
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