Consumer and corporate borrowing figures from the Bank of England showed healthy credit flows, along with rising mortgage approvals and steady asset accumulation, suggesting that while the UK economy may not be thriving it remains far from death's door.
Consumer credit flows rose £1.6 billion in July compared to June, following a £1.5 billion rise that month and an average of £1.4 billion since the start of the year.
Corporate credit flows also grew solidly, with total bank lending to businesses up 5.5% year-on-year in July, up from a 4.5% gain in June and the joint-highest since February 2021.
Net new mortgage approvals for house purchase rose to 65.4K in July, up from 64.6K in June. UK household deposits with banks and building societies, including NS&I accounts, increased by £7.2 billion in July, a smaller rise than the £8.9 billion in June.
Adjusted for inflation, household savings were roughly flat on a seasonally adjusted monthly basis, pointing to "few worries about rising inflation or tax-hikes in the upcoming budget", said economist Elliott Jordan-Doak at Pantheon Macroeconomics.
Overall, the consumer credit data suggested only a "limited hit" to household financial decision-making despite the "barrage of headwinds" in the first half of the year.
Thomas Pugh, economist at RSM, said the levels of consumer deposits were above the six-month average of £6.1 billion, which "suggests that consumers may be becoming a little less cautious, but that the savings rate remains high".
Taking the data altogether, he said it gives "a tentative sign of consumer spending picking up a little, and of business sentiment improving.
"At the margin, that probably further decreases the chances of another interest rate cut this year, but the inflation and labour market data remain key.”
The bulk of corporate lending was to large businesses, as usual, but while lending to bigger businesses grew 8% year-over-year, lending to SMEs grew only 0.9%.
However, Jordan-Doak noted that there has been a fall in lending to SMEs on a year-over-year basis for 45 months in a row until June of this year, and so the growth in lending in July "looks strong in that context".
"We think that falling borrowing costs and easing policy uncertainty should continue to support borrowing by businesses in the coming months," the economist said.