UK industry and lending point to broader growth

DATA released yesterday indicated a broad-based UK recovery, with British manufacturers growing apace, as figures on the housing market suggest recent regulatory changes have dampened a concerning upswing in mortgage lending.

Markit and the Chartered Institute of Purchasing and Supply (CIPS) announced a figure of 57 for their purchasing managers’ index (PMI) in May, the 13th consecutive month of expansion. Any figure over 50 indicates growth.

Though the PMI figure had been sliding in the months after November, slipping from 58.1 to 55.8, it has since picked up again, indicating that relatively rapid growth is continuing. The score was the EU’s highest once again.

The Bank of England’s mortgage lending figures for April showed credit falling once again, dropping to a nine month low of 62,918 approvals, a drop of more than 3,000 from March, and the third month of decline. In January, the recent peak of lending, 76,753 approvals were made, follow 11 months of gradual increases.

The figure for April is still about a quarter higher than in the same month last year, but may go some way to cool concerns that the UK’s recovery is weighted solely towards the housing market.

“The mortgage market review is not the only regulation putting the brakes on lending. The Bank of England are increasing stress testing of the top eight lenders, to make certain they can withstand a 35 per cent fall in house prices – making them more resilient to any future financial problems,” said Richard Sexton, director of Esurv.

Rob Wood of Berenberg commented on both releases: “The UK gets exactly what the Doctor ordered, as manufacturing output booms while new regulations ease some of the pressure in the housing market. The UK’s economic rebound looks an awful lot healthier after this data, with more evidence that this is no credit fuelled bubble.”