Consumer borrowing slumps in March, BoE figures show

Bank of England figures showed consumer borrowing slumped in March, adding to concerns that the economy may be slowing sharply.

Net lending to consumers dropped to £0.3bn – the lowest since November 2012 – from £1.7bn the month before. The figure for March was a fifth of the £1.5bn six-month average. The month-on-month increase was just 0.1% compared with 0.8% in February and 0.6% in January, sending the annual growth rate down to 8.6% from 9.4%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the consumer net lending figure usually withstood bad weather, suggesting consumers were becoming more cautious.

"The decline in lending coincides with a fall in consumers’ confidence in April to its lowest level since the referendum and a rise in saving intentions," Tombs said.

The BoE figures also showed the housing market was weak as house purchase mortgage approvals dropped to 62,914 from 63,781, slightly below expectations for about 63,000.

Economic indicators for March have been skewed by the severe winter weather that battered the UK at the end of the month. Retail sales fell by more than expected as consumers stayed away from shops, official figures showed on 19 April.

But recent indicators have sparked concerns about underlying weakness in the economy. First-quarter GDP growth was the lowest for five years at 0.1% – and weather was judged to have played only a small part in the slowdown. Manufacturing figures for April, also released on 1 May, showed factory growth falling to a 17-month low.

The BoE's credit figures also showed companies reining in their borrowing. Net finance raised by non financial companies was zero in March compared with £2.6bn in February and a six-month average of £1.4bn.

Capital Economics, which is usually positive about the economy's prospects, said the consumer figures were worrying. Paul Hollingsworth, Capital's senior UK economist, said: "While [BoE] policymakers have been somewhat worried about the rates of unsecured credit growth recently, from a financial stability perspective, a very sharp slowdown could raise concerns about growth in consumer spending."

The BoE is unlikely to increase interest rates in May but much of the recent weakness will be temporary and an increase remains on the cards for August, Hollingsworth said.