MACRO 4 minutes to read

Latest data show plunge in UK credit impulse

Christopher Dembik

Head of Macro Analysis, Saxo Bank Group

Summary:  UK credit impulse is heading lower, signalling a troubling growth outlook.


Click here to download this week's full edition of Macro Chartmania.

Following the release of updated Bank of International Settlements credit data, our in-house credit impulse for the UK is running at -2.2% of GDP, one of the weakest levels seen in developed countries. Data for previous quarters have been revised downward, leading to a deeper contraction in the credit impulse than preliminary data suggested.

UK credit impulse has experienced its biggest quarterly drop since the GFC in Q1 2018, evolving at -7.5% of GDP due to Brexit uncertainty and deteriorating credit conditions. We can see very well in the chart below that the negative trend in new credit flow started at the same time as the 2016 referendum and accelerated as difficulties finding a middle -ground between the UK and the EU-27 appeared.

As we have mentioned many times in previous analyses, the UK’s top issue is the lack of new credit growth as that is the main driver of economic activity. As household consumption is also fading, the growth outlook for the country is deteriorating very fast, a trend that should remain in place for at least the next six to nine months.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)