Consumer credit growth slowed at the end of 2016 according to new figures released by the Bank of England.
Although the annual rate of growth remained high, consumer credit grew at the slowest rate for two and a half years between November and December, with the monthly growth rate halving to 0.5 per cent from 1 per cent the previous month.
It is felt that households are possibly feeling the effects the pound’s fall in value, which in turn raises the cost of imports.
Retail spending was down by 2 per cent in December from the previous month, indicating that consumers were taking a more conservative approach and concentrating more on essentials.
Despite the Bank of England voicing concern over consumer spending, Chancellor Philip Hammond has said that he is relaxed about consumer borrowing and debt levels are more sustainable than they have been.
He also noted that the Bank of England had signalled the intention for interest rates to remain low for a long time, so the cost to households of sevicing debt would remain low.
Liz Martins, UK economist at HSBC, commented: ‘We are always hesitant to call a trend from one month?s data, but the drop in consumer credit growth in December was sizeable.’
The Bank of England also released figures for mortgage approvals, which reached a nine-month high in December.
However, this was only seen as a modest rise by economists, with Howard Archer from IHS Markit commenting: ‘While the latest data points to a pick-up in housing market activity from August?s low, it is still hardly racing ahead.’