May 1, 2018 / 8:43 AM / a year ago

UK consumers scale back borrowing in snowy March

LONDON (Reuters) - Britain’s consumers slowed their borrowing sharply in March, data showed on Tuesday, probably reflecting heavy snowfalls during the month that kept shoppers off the streets but also underlying weakness in the economy.

Pound notes and coins are seen inside a cash register in a bar in Manchester, Britain September 6, 2017. REUTERS/Phil Noble

In a latest sign of slow growth in early 2018, which is likely to dissuade the Bank of England from raising interest rates next week, consumer credit lending edged up by only 254 million pounds from February, BoE data showed.

That was much weaker than a median forecast for growth of 1.45 billion pounds in a Reuters poll of economists.

The annual growth rate in unsecured consumer lending tumbled to 8.6 percent, its slowest since November 2015, down from 9.4 percent in February.

The drop in the annual growth rate was the sharpest from one month to the next since August 2009.

Consumer credit growth has been slowing since it peaked at nearly 11 percent in December 2016, reflecting pressure from the BoE on banks to scale back risky lending and the impact of rising inflation, following the 2016 Brexit vote, and weak wage growth on households.

The BoE also said the number of mortgages approved for house purchase fell to 62,914 from 63,781 in February, slightly below economists’ forecasts of a drop to 63,000 in the Reuters poll.

A year ahead of Brexit, Britain’s economy barely grew in the first quarter of 2018, data published on Friday showed. Official statisticians said only some of the slowdown was linked to unusually heavy snowfalls.

A survey of Britain’s manufacturing sector published on Tuesday showed that growth among factories was weaker than expected in March.

The housing market has also been sluggish - especially in London and surrounding areas. Mortgage lender Halifax has said it expects house prices to rise only 1 percent this year.

The BoE raised interest rates for the first time since 2007 in November. But expectations of a second rate hike as soon as next week were dashed after the recent weak economic data and a suggestion by Governor Mark Carney that the BoE might wait until later in the year.

Figures last week from industry group UK Finance showed British banks in March approved the second-lowest number of mortgages since early 2015 as the cold weather added to a slowdown in demand.

The BoE data published on Tuesday showed net mortgage lending rose by 3.968 billion pounds.

Reporting by William Schomberg and David Milliken

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