UK economy showing signs of losing momentum, warns S&P

The UK economy has begun to show the first signs of growth slowdown, ratings agency S&P said in a note on Wednesday, with softer demand for loans from both businesses and households.

This has been accompanied by other signs such as a decrease in retail sales volumes, with the credit agency not the only ones to expect the adverse impact of a squeeze on household budgets from Brexit-related uncertainty and inflation.

S&P said UK financial conditions remained "broadly favorable to growth", with financing costs edging ever lower thanks to the Bank of England's ultra-accommodative monetary policy, the central banks's recent data suggested demand was starting to slip somewhat following the Brexit referendum.

"This supports our view that the U.K. economy is set to slow gradually over this year," said senior economist Boris Glass.

The UK has strong increase in consumer credit in recent years, Glass said the annual growth numbers hide some interesting detail, with recent monthly flow data showing net consumer credit actually slowed notably in December and January, where seasonally adjusted unsecured lending to households was, at £1bn and £1.4bn, significantly lower than the £1.6bn average in the 11 months to November 2016.

"In our view, this is a sign that the consumer spending spree that almost entirely drove GDP growth in 2016 is likely to have started cooling," he said.

This was supported by the softening retail data, with January's three-month rolling average declining for the first time since 2013

S&P felt current favorable credit supply conditions will not be able to completely offset the expected adverse impact of "pronounced" uncertainty over Brexit-related and the squeeze on household budgets from inflation.

"UK demand for funding from both businesses and households has been softening somewhat at the beginning of this year, which we believe is the first sign of the gradual slowing of the economy that we expect for 2017," said Glass.