Surprise weakness in June lending despite growth

LENDING figures for June dipped below expectations yesterday, with a smaller rise in consumer credit than expected, despite the fledgling recovery indicated by recent growth.

The Bank of England recorded a £489m increase in consumer credit, compared to £781m of additional lending in May. The average monthly rise in 2013 has been around £700m, suggesting a minor slow-down.

Despite the heating up of the housing market this year, mortgage approvals dipped from the previous month. June saw 57,667 approvals, down from 58,071 in May.

The level of new mortgages is still higher than the post-crisis average, but much lower than seen before 2008, when over 100,000 monthly approvals were regularly made.

Despite the discouraging figures on lending generally, there was some comfort for small and medium-sized enterprises (SMEs), which saw a rare rise in credit last month.

Lending to SMEs rose by £238m, after a fall of £476m in May. It was the best month for lending to small firms since the Bank began recording two years ago. Despite this, John Allan of the Federation of Small Businesses said: “For a lasting impact we need to see this over a number of months”.

M4 excluding other intermediate corporations, a measure of the money supply, rose by £5.8bn in June. When annualised, the past six months’ growth amounts to 5.2 per cent, lower than the pre-crisis trend. Simon Ward, chief economist at Henderson, suggested that this showed that QE had little effect on monetary growth: “Despite the suspension of formal QE last November, non-financial M4 rose at similar rates in the first half of 2013 and second half of 2012”.