Consumers repaying credit card debts and manufacturing booms as Covid restrictions ease, new figures show
Mortgage borrowing in the UK has reached its highest level since modern records began as buyers rushed to beat the now-extended stamp duty holiday deadline.
Bank of England figures showed that Rishi Sunak’s decision in the budget to extend the tax break until June did not dampen a burst of activity in the housing market in March.
Although the number of new mortgage approvals dropped from 87,000 to 83,000 in March, they remained higher than the 73,000 recorded in February 2020, the last month before the UK went into its first pandemic-induced lockdown.
The completion of deals took net mortgage lending to £11.3bn in March – higher than in any month since the series began in 1993. With lockdown measures affecting bars, restaurants, shops and other leisure activities, consumers continued to repay credit card debts, with the Bank reporting net repayments of £500m in March.
Economists said the housing market was fuelled by homebuyers who are typically from higher income groups who had avoided the brunt of job losses caused by the Covid-19 pandemic.
Laith Khalaf, financial analyst at AJ Bell, said low interest rates from the Bank of England were also helping to fuel the boom in mortgage borrowing. Threadneedle Street’s rate-setting monetary policy committee is expected to keep the cost of borrowing unchanged at record low levels at its next meeting on Thursday.
However, he added: “Pushing your finances to the limit to borrow as much as possible has never been a great idea, but when interest rates look like they can only head in one direction, it’s particularly dangerous.”
Separately, an update on the state of manufacturing showed that despite grappling with supply shortages, industry put in its strongest performance since the mid-1990s in April. The final purchasing managers’ index (PMI) from Markit/CIPS stood at 60.9 last month, slightly up on the initial, flash estimate of 60.7, and well above the 50 dividing line between expansion and contraction.
The report showed manufacturing production increasing for the 11th successive month, with output growth boosted by an easing of lockdown restrictions, improved demand and rising backlogs of work.
Rob Dobson, a director at IHS Markit, said: “Further loosening of CCovid-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export.
“The sector also remains beset by supply-chain issues and rising inflationary pressures. Disruption following Brexit and Covid-19, especially at ports, caused a further near-record lengthening of supplier delivery times. The resulting input shortages kept producer price inflation among the highest over the past four years.”
The latest snapshots come amid a rapid recovery in economic activity as lockdown measures are relaxed. Sunak said on Tuesday that he believed the early indicators were “signs to be cautiously optimistic” over the strength of the post-pandemic British economy.
Speaking at an event hosted by the Wall Street Journal, he said: “We are seeing consumer confidence in the UK has returned back to pre-pandemic levels. Surveys from the business side, CFOs [chief financial officers] in particular, are very positive about the outlook in the short-term.
“The signs are promising.”
Source : The Guardia
