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U.K. Borrowing Slowdown May Not Be Enough to Allay Concerns

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  • U.K. Borrowing Slowdown May Not Be Enough to Allay Concerns

U.K. consumers are borrowing less freely as inflation bites and Britain prepares for Brexit, though the slowdown may not be enough to dispel concerns over the level of personal debt.

Unsecured lending growth slowed to 1.4 billion pounds ($1.7 billion) in February, below the 1.6 billion pounds averaged over the previous six months, data published by the Bank of England Wednesday show. It left the annual rate at 10.5 percent, and borrowing on credit cards grew at the fastest pace in 11 years.

The figures come on the day that Prime Minister Theresa May is due to serve formal notice that Britain is leaving the European Union, confronting households with two years of uncertainty at a time when incomes are already being eroded by accelerating inflation.

That’s making consumers a little more cautious, but policy makers and analysts remained concerned that the buildup of debt is unsustainable. The ratio of household debt to disposable income is high by international standards and has started to pick up again, after falling from about 160 percent before the 2008 financial crisis.

U.K. regulators are to review credit quality and lending standards, the Bank of England announced on Monday. The move came as Citigroup warned that consumers are taking out more unsecured debt than they can pay back, putting banks such as Lloyds Banking Group Plc and Barclays Plc at risk of loan losses.

One area of concern is the increased use of interest-free balance transfers on credit cards, which can encourage consumers to borrow heavily. The latest figures show credit-card debt climbed 9.3 percent in February from a year earlier, the fastest pace since February 2006. Other forms of consumer finance, including personal loans, overdrafts and car lending, grew an annual 11.1 percent.

Recent figures point to a slowdown in consumer spending, which has driven the economy since the June Brexit vote. Retail sales fell at their fastest pace in seven years in the three months through February and consumer confidence fell last month. Food and fuel prices are rising rapidly as a result of the 17 percent decline in sterling since the referendum.

Borrowing has in part been fueled by falling borrowing costs. The interest rate on a 10,000-pound personal loan fell to 3.66 percent in February, the lowest since records began in 1995.

The BOE said mortgage approvals fell to 68,315 in February, pointing to a housing market set for steady rather than spectacular growth this year. Net mortgage lending stood at 3.5 billion pounds.

Lending to non-financial firms fell by 1.8 billion pound last month, weaker than average. Overseas investors bought a net 742 million pounds of gilts following net sales of 7.6 billion pounds in January.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

OPEC Agrees to Increase Oil Supply by 500,000 Barrels Per Day Ahead of Surge in Demand

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Nigeria's economic Productivity

OPEC and allies finally agreed to ease their 7.7 million barrels per day production cut by 500,000 barrels per day starting from January 2021.

This will now bring the oil cartel’s total production cuts to 7.2 million barrels per day starting from next year.

Oil prices rose after the news as the market believed the approval of Pfizer COVID-19 in the United Kingdom will kick start a series of approvals and helped restore confidence, increase business activities and demand for the commodity across the globe.

After the outcome of the meeting was made public on Thursday, Brent Crude Oil against which Nigerian oil is priced gained 1.35 percent on Friday after gaining 1.4 percent on Thursday to $49.37 per barrel at 11.35 am Nigerian time on Friday.

The US West Texas Intermediate gained 1.29 percent to $46.23 barrel on Friday.

500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.

Investors King increased business sentiment in the energy sector to boost investment, increase activity in the sector and most important improve crude oil demand enough to accommodate the 500,000 barrels per day extra that would be hitting the global market starting from January.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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