UK: Shoppers set to remain cautious, despite borrowing recovery – ING

Household borrowing recovered in April, but the cracks forming in the UK’s retail sector remain a big risk for the Bank of England, according to James Smith, Developed Markets Economist at ING.

Key Quotes

“It’s not something markets or analysts typically spend much time looking at each month, but the unexpectedly sharp fall in consumer credit in March was probably a key factor in the Bank of England’s decision to keep rates on hold in May.”

“Admittedly the reasons for this sudden decline were fairly unclear, and the latest figures released today show that the amount of unsecured consumer credit supplied fully recovered in April, rising by £1.8 billion. This tentatively suggests the  fall was simply a blip, perhaps related to the wider economic slowdown in March (although it’s not entirely clear why the bad weather would have resulted in such a sharp change).”

“Meanwhile, consumers continue to remain cautious. While household incomes are no longer being squeezed quite as much as before, shoppers are now being confronted with higher petrol prices, and the latest confidence surveys suggest individuals remain pessimistic about the economic situation overall.”

“The cracks forming in the retail sector remain a risk to the Bank of England outlook.”