Consumer credit fuels UK growth as manufacturing slows
Lending to Britons surged towards the end of 2015 at the fastest rate in almost a decade but manufacturing growth slipped, according to figures yesterday that underscored Britain's reliance on consumers to drive its economy.
Net lending to consumers rose 8.3pc in the year to November, the Bank of England said, in what was the fastest credit growth since February 2006. To date the bank has dismissed the idea that Britain's economic recovery is disproportionately reliant on debt.
Stronger-than-expected lending growth and mortgage approvals helped lift sterling from a nine-month low against the dollar yesterday, a weakness that partly reflects concerns that the economy might be too weak to justify an interest rate rise this year.
Although Britain's economy probably ended last year as one of the fastest-growing in the developed world for a second year in a row, there are concerns that the growth is unbalanced and may be hurt by a likely in/out referendum this year on European Union membership.
News that growth in British manufacturing slowed more than expected in December, as export orders took a hit, was a reminder of Britain's reliance on domestic demand.
The Markit/CIPS manufacturing purchasing managers' index (PMI) dropped to a three-month low of 51.9 from 52.5 in November, at the bottom end of expectations in a Reuters poll that forecast a consensus reading of 52.7.
Manufacturing failed to contribute to Britain's economic growth through the first three quarters of 2015, with the much larger services industry instead driving the recovery.
"Looking ahead, manufacturing looks set to play firmly second fiddle to services in driving growth in 2016. That prediction is consistent with the household borrowing numbers for November," Martin Beck, economist at the EY ITEM Club consultancy, said. (Reuters)