Osborne hit by drops in credit and factory stats

Julian Harris
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HOPES for a growing recovery in the UK economy were dented yesterday by two data releases that exposed weak lending rates and another contraction in the country’s manufacturing sector.

Consumer credit and mortgage lending both unexpectedly sank in August, according to figures from the Bank of England, dipping by £134m and £276m respectively.

Total lending suffered its steepest drop since the summer of 2010.

The figures “suggest that the introduction of the Funding for Lending Scheme (FLS) has not produced significant immediate results in improving the growth or price of credit to households and businesses,” said Citi economist Michael Saunders.

“Overall lending to individuals fell by £0.4bn month-on-month in August, and the annualised growth rate over the last three months is zero – matching the record low in early 2010.”

The Bank denied that the FLS had begun disappointingly. “Early indications suggest the FLS is having an impact, but it is unrealistic to expect to see that in lending figures for August,” a spokesperson said.

Yet the figures will nonetheless worry chancellor George Osborne, along with more bearish data over the UK’s economic prospects.

Britain’s recent manufacturing decline worsened in September, according to a widely-regarded business survey conducted by research firm Markit. The group’s latest purchasing managers’ index (PMI) sank to 48.4 from 49.6 in August. Figures below 50 indicate contraction, and September was the fifth consecutive month of economic decline in the factory industry.