Chart of the Week: Disappointing UK Credit Data Point to a Higher Saving Rate

In putting together its relatively upbeat August Inflation Report projections for the UK economy the MPC made two key assumptions. First, it assumed that there would be a smooth adjustment to a new set of trading arrangements following the UK’s departure from the EU next March. Second, it assumed that the UK household saving ratio would remain close to an all-time low. The risks around both of these judgments lie in one direction, and that is to the downside. Last year lenders came under pressure from the Bank of England’s Financial Policy Committee to reduce the risks to their loan books from rapid rates of growth in unsecured credit. Against that backdrop, we at Fathom expected to see an increase in the UK household saving ratio through this year. Last week’s money and credit data showed that unsecured lending to individuals slowed sharply in July. For the second time this year, the data were significantly weaker than expected, perhaps suggesting that household savings are indeed set to rise.

Refresh the chart in your browser | Edit chart in Datastream

______________________________________________________________________

Thomson Reuters Datastream

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Thomson Reuters offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.