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Financial News: UK Households' Borrowing Declines Ahead Of Brexit Deadline

UK Households' Borrowing Declines Ahead Of Brexit Deadline

09/30/2019 - 06:05:00 (RTTNews)

(RTTNews) - British households' borrowing declined in August as uncertainties surrounding Brexit weighed on consumer confidence, data from the Bank of England revealed Monday.

Data from the statistical office showed that the UK economy contracted as initially estimated in the second quarter on the weaker services sector.

The number of mortgage approvals for house purchase fell to 65,500 in August from an18-month high of 67,000 in July, the central bank reported. This was well below the forecast of 66,500.

Borrowing for house purchases came in at GBP 3.9 billion, followed by a strong net flow of GBP 4.5 billion in July.

Consumer credit growth eased to 5.4 percent in August, which was the lowest since February 2014. The extra amount borrowed by consumers in order to buy goods and services decreased to GBP 0.9 billion in August, slightly below the GBP 1.0 billion average since July 2018.

At the same time, lending to businesses totaled GBP 2.4 billion in August compared to GBP 2.3 billion in July.

Looking ahead, Hansen Lu, an economist at Capital Economics, said despite evidence of strong price competition among mortgage lenders, a revival in mortgage lending volumes is unlikely, regardless of the Brexit outcome.

If the UK were to exit the EU with no deal in October, house purchase approvals could fall sharply, perhaps by as much as 10 percent, although lending would likely bounce back fairly quickly, the economist noted.

Revised data from the Office for National Statistics showed that gross domestic product fell 0.2 percent sequentially in the second quarter, partly reversing the first quarter's revised 0.6 percent growth.

The stockpiling boosted the economic growth in the first quarter but those stock levels were partly run down in the second quarter.

On an annual basis, the economy grew at a slower pace of 1.3 percent after rising 2.1 percent in the first quarter. The second quarter rate was revised up marginally from 1.2 percent.

Services provided the only positive contribution to the sequential growth, with growth slowing to 0.1 percent in the second quarter. This was the weakest growth in three years.

Reflecting sharp decrease in car output, production output declined 1.8 percent, the biggest since late 2012. Construction output fell 1.2 percent.

The expenditure side breakdown showed that private consumption, government consumption and net trade contributed positively, while gross capital formation contributed negatively to GDP growth.

Household spending gained 0.4 percent and government spending grew 1.1 percent, while gross fixed capital formation was down 0.9 percent. At the same time, business investment decreased 0.4 percent reversing a 0.8 percent rise a quarter ago.

The total trade deficit halved to GBP 11.4 billion as imports returned to normal levels. The current account deficit narrowed by GBP 7.9 billion to GBP 25.2 billion, or 4.6 percent of GDP in the second quarter.

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