Economic Perspectives –

Cautious households continued to save in July, whilst borrowing no additional consumer credit

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


6th September 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK data:

  • According to Bank data, households’ money holdings rose by £7.1bn in July. The household sector’s money holdings increased by nearly £230bn between February 2020 and July 2021.
  • Households borrowed no addition consumer credit in July. An additional £0.1bn of “other” forms of consumer credit was offset by net credit card repayments of £0.1bn. The annual growth was -2.7% in July, compared with -2.2% in June.
  • Individuals repaid £1.4bn of mortgage debt (net) in July, but this followed record borrowing in June (£17.7bn), which was probably boosted by the tapering of the stamp duty holiday.
  • Approvals for house purchases fell to 75,200 in July, compared with June’s 80,300 and May’s 86,200. But it remained above pre-February 2020 levels.
  • The Nationwide reported that house prices rose by 2.1% (MOM, seasonally adjusted) in August, possibly reflecting lack of supply, to be 11.0% higher YOY, after July’s annual growth of 10.5%.

Other UK news:

  • The Bank announced that Huw Pill is their new Chief Economist.

International update:

  • Eurozone CPI inflation rose to 3.0% in August, after July’s 2.2%, partly reflecting “base effects”. Moreover, energy prices were 15.4% (YOY) higher and CPI inflation, excluding energy, was 1.7% in August, after July’s 0.9%.
  • August’s 3.0% inflation rate was above the ECB’s “2% target in the medium term”, but the revised target allows for inflation to be “moderately above target” for a “transitory period”.  
  • The Governing Council of the ECB will meet this week, with an announcement on monetary policy on 9 September. There is speculation the ECB may give an indication of their intentions vis-à-vis reducing asset purchases (“tapering”).
  • The ECB will release a new set of economic forecasts. In June, they said that CPI was expected to spike at 1.9% in 2021, driven by “temporary upward factors”, before returning to rates of 1.5% and 1.4% in 2022 and 2023. It is expected the inflation forecasts will be revised higher.   

Ruth Lea said “Granted, UK households are continuing to behave cautiously, but economic recovery continues. And, as I have said on previous occasions, the Bank should consider curtailing their asset purchases. In this context, it is interesting that the Bank’s new Chief Economist, Huw Pill, has been reported as “hawkish”, backing limits on QE, leading to speculation that his appointment may be a sign that the Governor is keen to rein in QE. The decisions of the next MPC meeting, announced on 23 September, may indicate a change in the Bank’s policy on asset purchases.”





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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