Retail cheer as credit surges

DEMAND for credit surged dramatically in December, raising hopes that the hectic start to the winter sales may herald a sustained acceleration in high street spending.

Infolink, the credit information organisation, reports today that demand for credit in the first three weeks of December was as much as 19 per cent higher than in the same period of 1991. A spokeswoman described the figure as 'one hell of a jump' and added that it was by far the largest increase of 1992.

The provisional December figure follows a second successive month of rising credit demand in November. The volume of retail credit inquiries was 1.7 per cent up on 1991, following a 2.1 per cent annual increase in October.

Finance house credit inquiries were 2.6 per cent up on last year, compared with a 4.5 per cent drop in the year to October. Inquiries about home loans and new car loans also improved slightly between October and November.

Brian Bailey, Infolink's chairman, said the figures were 'an encouraging sign that the new year may herald a sustained growth in the demand for credit, boosting the economy in 1993'. But he warned that part of the increase may have been the result of more Sunday trading, while the prospect of continuing rises in unemployment was likely to remain a drag on consumer confidence.

The British Retail Consortium has also warned that the brisk start to the winter sales may be a sign of more sophisticated bargain-hunting by consumers rather than the start of a sustained boost to spending.

With the outlook for domestic spending uncertain, Oxford Economic Forecasting also warns today that the prospect of deepening recession in Germany will constrain demand for exports.

OEF does not expect base rates in Britain to follow German interest rates down this year, and thus 'the full effect of Germany's slump will be felt through exports'. OEF forecasts 0.7 per cent growth in Britain this year, compared with the Treasury's 1 per cent Autumn Statement forecast.

West Germany is forecast to see national output drop by 1.1 per cent this year, although growth in the US will accelerate to 3 per cent, OEF believes.

Separately, the Purchasing Managers' Index, which measures new orders, output and employment and is designed to provide an early indication of economic change, declined to 49.2 per cent in December, implying a fall in manufacturing industry activity for the sixth month in a row.

The prices of raw materials jumped for the third month running, reflecting the devaluation of the pound in September.