The key chart
Monthly flows (£bn) of UK consumer credit since November 2019 (Source: BoE; CMMP)
The key message
UK consumers are still not reading the BoE’s script – at least not fully.
Monthly flows of consumer credit rose to £2.0bn in November 2023 from £1.4bn in October 2023 and £1.5bn in September 2023 (see key chart above). The rise was largely attributable to a £0.5bn increase in borrowing on credit cards from £0.5bn in October 2023 to £1.0bn in November 2023.
The annual growth rate in the stock of consumer credit rose to 8.6% YoY, the highest rate since September 2018.
So what?
The BoE argues that, “higher interest rates make it more expensive for people to borrow money and encourages them to save.” The cost of borrowing has increased and households are saving more too. However, they also continue to borrow to fund consumption – in November the amount was 1.7x the average pre-pandemic flow.
In short, the BoE’s policy appears to resemble a three-legged stool that is missing an important leg…
Please note that the summary comments and chart above are abstracts of more detailed analysis that is available separately.