29 June 2006
The Bank of England (BoE) has said that unsecured lending to individuals increased for the second consecutive month during May and was also above the six month average.
Howard Archer, chief UK and European economist for Global Insight, says that the figures suggest that consumers have livened up after a slow start in 2006, in part due to the World Cup.
"Nevertheless, consumer credit is still relatively limited by recent past norms," he warned.
"Consumer spending and borrowing has clearly been boosted recently by sales of televisions and merchandise related to the World Cup. We suspect this could well prove to be a temporary burst of energy from consumers, as significant problems remain regarding their longer-term health."
Mr Archer cited moderate earnings growth, a rising tax burden, soaring utility bills, higher debt levels, pension concerns and rising unemployment as the principle obstacles.
"These factors are expected to counter the support for spending coming from high employment and the currently healthier housing market."
He added: "Record high debt levels, rising unemployment and increasing pension concerns means that there is an increased need for many consumers to try and improve their balance sheets. This need would be heightened if the Bank of England raises interest rates any time soon."
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