Recession knife-edge: Consumer spending on credit at £1.3bn as house prices continue to slide

Britain’s better than expected economic performance since the turn of the year is poised to have lured consumers into splashing the cash on their credit cards, new numbers out this week are tipped to show.

Families are tipped by markets to have borrowed £1.3bn in March, which would signal spending in the UK is holding up pretty well despite the economy stuttering.

Although that would be a small fall from February’s £1.4bn total, it would top the average monthly credit card spend in 2022 of £1.2bn.

“That consumer confidence has started to recover from very depressed levels and job creation has remained healthy may have supported lending in March,” analysts at consultancy Oxford Economics said.

Britain is largely tipped to skirt a recession this year and unemployment is poised to increase only slightly, strengthening households’ confidence to repay debt.

The numbers, from the Bank of England on Thursday, will also provide insight into how the UK’s housing market is responding to the central bank’s eleven straight interest rate increases.

“Mortgage approvals, however, we think will continue to edge up, rising to 46.5k in March,” Sanjay Raja, senior economist at investment bank Deutsche Bank, said, adding there has been a “very marginal pick up in new buyer enquiries with stocks continuing to remain weak”.

While likely recovering in March, demand for home loans has dropped substantially over the past year, mainly due to mortgage rates soaring, forcing prospective buyers out of possible home purchases. 

Data from building society Nationwide today will also show how that slow down in demand is impacting house prices. Markets reckon they fell again, by 0.5 per cent, over the last month.

Final purchasing manager indexes today and Friday are likely to confirm most of the UK private sector is growing and out of recession, except factories, who are being crushed by the Bank’s aggressive rate rises. 

Food inflation data published today could show supermarket prices are still rising sharply.

Local elections take place on Tuesday, while leisure and hospitality businesses will be gearing up for the busy coronation weekend.

In what will be a shortened week for London traders due to the bank holiday, investors’ focus will zero in on whether the US Federal Reserve raises borrowing costs for the ninth time in a row on Wednesday. It is still unclear whether the world’s largest economy is in a recession.

There is mounting expectation that this week’s anticipated rate hike – probably by 25 basis points – will be Fed Chair Jerome Powell and co’s last, sending borrowing costs to a range of five and 5.25 per cent.

European Central Bank officials are poised to follow the Fed in lifting rates on Thursday, although markets are divided on whether President Chritine Lagarde and her team of rate setters will jack them up by 25 or 50 basis points.

Inflation has eased in both the US and eurozone and is poised to drop quickly this year.

British Airways, HSBC, Lloyds Bank and BP lead corporate agenda

Topping the corporate agenda this week is British Airways owner IAG, posting results on Friday. 

Market participants will also be keen to see how UK banks Lloyds (Wednesday) and HSBC (Tuesday) fared in the first quarter. Their rivals NatWest and Barclays clocked bumper profits in the first three months, they announced last week.

Oil giants BP and Shell also update investors on Tuesday and Thursday respectively.

London’s FTSE 100 was pretty subdued last week, shedding a little over 0.4 per cent to close at 7,870.57 points.