Early Christmas spending boosts credit, but expect a New Year drop

Thomas Pugh, economist at RSM UK, said: ‘The latest money and credit figures suggest that consumer spending in November was reasonably strong, but increased consumer caution in December due to the Omicron variant probably caused spending to drop last month. 

‘Credit growth picked up to its fastest rate since July 2020 and households added just £4.5bn of cash to their holdings, well below the six-month average of £7.9bn. Combined with stronger retail sales data for November, this suggests that consumer spending was reasonably strong in November. But this could just have been driven by earlier Christmas shopping and it seems apparent that the emergence of the Omicron variant caused consumers to retreat in December and January. As a result, we are expecting GDP to shrink about 1% from November to January before rebounding in February. 

‘Consumers borrowed £1.2bn in consumer credit in November. This was driven by a £0.9bn increase in credit card debt. This was in line with the average of £1.2bn a month of consumer credit which was borrowed before the pandemic. 

‘Meanwhile, the housing market appears to be settling after the end of the stamp duty holiday. Approvals for house purchases dropped from 67,103 in October to 66,964 in September.’ 

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