August 30, 2017 / 11:46 AM / a year ago

UPDATE 1-Lending to UK consumers cools as economic confidence ebbs

    * Consumer credit growth weakest since April 2016 - BoE
    * European Commission reports fall in consumer morale
    * Mortgage approvals surge, according to BoE figures
    * But outlook for UK economy murky

 (Adds EC consumer confidence, reaction, graphic)
    By Andy Bruce and Michael Urquhart
    LONDON, Aug 30 (Reuters) - Lending to British consumers
expanded at the weakest pace in more than a year in July as
their confidence in the economy ebbed, according to figures that
clouded the outlook for growth later this year.
    Annual growth in consumer credit slowed to 9.8 percent from
10.0 percent in June, the weakest increase since April 2016, the
Bank of England said on Wednesday.
    Separate figures from the European Commission showed British
consumer morale slipped this month, pulled down by deteriorating
confidence in the state of the economy.
    Britain's economy has had its slowest start to the year
since 2012 as consumers have come under pressure from a big rise
in inflation since sterling fell after last year's Brexit vote.
    "With real income barely growing and the savings ratio at
historically low levels, households are now significantly
stretched financially," said Barclays economist Fabrice
    The BoE said that in cash terms, consumer credit increased
by 1.179 billion pounds ($1.52 billion) in July - well below the
1.5 billion pound consensus in a Reuters poll of economists and
marking the smallest rise this year.
    Wednesday's data showed a mixed picture for the housing
    The BoE said lenders approved 68,689 mortgages in July
compared with 65,318 in June, topping all forecasts in a Reuters
poll of economists that pointed to 65,500 approvals.
    But the value of mortgage lending increased by 3.601 billion
pounds in July, slowing from 4.134 billion pounds in June.
    Earlier this month the BoE said it expected mortgage
approvals to average around 66,000 a month over coming quarters.
    Taken together, Wednesday's figures painted a murky outlook
for Britain's economy. 
    All five of the European Commission's economic confidence
indicators - covering industry, services, construction, retail
and consumers - declined in August.
    British consumers' confidence in the state of the economy
over the last 12 months slid to a four-year low, the EC said.
    "The decline in (consumer) confidence is more striking when
set against the backdrop of strengthening consumer sentiment in
the euro area and U.S.," noted JPMorgan economist Allan Monks.
    Economic growth figures published last month showed sources
of growth like net trade and investment have yet to compensate
for the consumer-led slowdown, as the Bank of England hopes.
    A Reuters poll of economists earlier this month showed
Britain's economy looks likely to expand around 0.3 percent per
quarter through to mid-2018, with a one-in-five chance of
 ($1 = 0.7736 pounds)

 (Reporting by Andy Bruce and Michael Urquhart; Editing by Hugh
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