21st November 2017.
Households Feel Squeezed As Credit Dries Up
Household budgets are being squeezed as they find it increasingly difficult to borrow, according to a survey conducted by IHS Markit.
Credit availability in November has fallen at its fastest rate for two-and-a-half years. This shortage comes as a result of increased borrowing rates since June last year.
Retailers will feel the effects of the borrowing shortage as consumers rein in their spending. Shops have already suffered a fall in sales in October, and this may affect them further in the lead up to the crucial Christmas trading period.
Sam Teague, economist at IHS Markit, observed that with wage rises stalled, higher inflation has forced consumers to utilise credit and unsecured funds to fill the gap.
Ruth Gregory of Capital Economics expects personal finances will struggle until wage growth picks up next year, but hopes this will transform consumers’ indulgent spending habits.
“Looking ahead, with inflation now close to its peak and the tightening in the labour market set to deliver a bit of an acceleration in wage growth, spending growth should soon be on a more sustainable footing and reliance on unsecured credit should diminish,” Ms Gregory said.
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