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Slowdown In Lending Acts As Warning

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Slowdown in lending acts as warning

Lending to companies and households fell in April for the first time since records began in 1997, in a sign that the economy remains in the grip of the credit crunch.

The slowdown in lending serves as a warning that while some "green shoots" are emerging in the economy, constrained access to credit and weak demand for loans in the private sector could yet kill them off.

Outstanding loans held by the private sector fell by 0.1 per cent in the month, implying a net repayment of debts, after rising by 0.2 per cent in March, according to data from the Bank of England that cut out the effects of securitisations and lending to non-bank financial institutions.

The annual rate of growth of lending to companies and households fell to 2.6 per cent in April, a record low, compared with an average of more than 10 per cent between 1997 and the beginning of the credit crisis in 2007.

"With lending growth to the non-financial sector still sluggish, we still find it hard to see how a strong and sustained recovery in the wider economy is possible," said Vicky Redwood, of Capital Economics.

While surveys of business activity have been showing sharp improvements, concerns remain widespread that tight credit will limit a robust recovery.

The data provide little indication that the Bank's £125bn programme of quantitative easing is having much impact on the broad money supply or credit growth, which the Bank in March marked out as being key measures of the scheme's effectiveness.

"Risk assets have done well, most lead activity guides have strengthened and housing is clearly picking up. But, money and credit have actually shown no improvement at all," said Michael Saunders, an economist at Citigroup.

One explanation offered by analysts is that many of those who have sold government debt to the Bank so far have been foreign investors. That diminishes the prospect that they will reinvest the cash raised by the sales in the UK. It also blunts the impact on domestic money supply.

The Bank thinks it could take six to nine months for the effects of quantitative easing to become clear.

The slowdown in credit availability came as lending to households was weak at 0.2 per cent for the fourth month in a row, and private companies made a large 0.9 per cent repayment of debts.

Mortgage lending continued to show signs of picking up, albeit from historically low levels, with approvals for new house purchases rising from 40,038 in March to 43,201 in April, a rise of 7.9 per cent and the highest since the previous April.

You don't have to read between the lines with this article. It's telling you to calm down and think before acting (spending).

Our resident ramping numpties have the memory of ejaculated sperm, and constantly overlook the big economic woes facing the Uk and world at large.

Come here for a lark, a laugh, maybe some counterpoint, but avoid the advice of anyone trying to sell you something.

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But but Hamish and Sibley say everythings going up its the recovereh!

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