The Bank of England has been setting off alarms about rapidly rising credit card debt in the UK, requesting that consumers and bank take stock. The request have been civil but commanding: Slow it down.
In the U.S. market, consumers were ahead of the game with a $100 billion decrease in June 2018. Growth slipped modestly.
The UK strategy worked, at least last month. To meet the BoE goal, winter holiday spending needs to significantly decrease.
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Consumer borrowing growth slowed sharply in July as Britons tightened their belts and lenders became more cautious. The annual pace of credit growth dropped to 8.5 percent, the lowest level since November 2015, according to Bank of England data published on Thursday.
FT is not alone. Bloomberg weighs in.
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Unsecured credit increased by 817 million pounds ($1 billion), half the pace of the previous month, the BOE said Thursday.
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The rapid buildup of debt has been a source of concern for financial-stability officials after Britons took advantage of the record-low borrowing costs deployed since the financial crisis. Consumers now owe more than 200 billion pounds in unsecured credit and higher rates could increase the pressure on the most highly indebted households.
Now, just using the “back of the envelope” to compare household debt, according to the World Bank, the UK population is 65.7 million and the US population is five times larger at 323.1 million. With U.S. card debt at $1 trillion and the GBP trading at $1.30 per dollar, we are pretty close to the UK household mark.
According to the Federal Reserve, U.S. consumer revolving debt dipped slightly between May 2018 and June 2018, ending at 1.0388 trillion, seasonally adjusted.
Looks like winter holiday spending may be sparse for all.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group