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Hopes of economic recovery were fuelled today by a sharp rise in mortgage lending and improved sales on the High Street.
Banks and building societies lent £16 billion in home loans last month - up 26% from June but down 36% on July last year.
Retail sales were 3.3% higher than in July last year, driven by increasing demand among shoppers for clothes and shoes.
The recovery in the housing market also drove sales of furniture and electrical items.
James Knightley, economist at ING Bank, said: "This give us greater confidence that gross domestic product will rise in the third quarter, meaning the UK exits recession."
The economy shrank by 0.8% in the second quarter and 2.4% in the first quarter following three quarters of contraction last year. However, economists warned the recovery could be held back as taxes rise and spending is cut to reduce ballooning levels of Government debt.
Shocking figures today showed the Government borrowed a record £8 billion last month pushing national debt above £800 billion or 56.8% of GDP. Vicky Redwood, of Capital Economics, said: "Retail sales are holding up well, but the dire public finance figures underline the need for severe fiscal consolidation. We continue to think the prospect of sharp tax rises - on top of rising unemployment and weakening pay growth - will eventually prompt this High Street resilience to fade."
The pound fluctuated as the City digested the mixed figures, first rising on the good news from the housing market and the High Street, but then falling as the dire state of the public finances was laid bare. It settled down 0.38 cent at $1.649.
The £16 billion of home loans advanced in July was the most for nine months, according to the Council of Mortgage Lenders, as buyers took advantage of the collapse in house prices and low interest rates.
"This is further evidence of a modest improvement in the market over the summer after an exceptionally weak winter," said CML economist Paul Samter. "However, activity is still subdued by historic comparison - this is the lowest July lending since 2001.
"The bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current backdrop."
Nick Hopkinson, director of Property Portfolio Rescue, said: "The fact mortgage lending was up in July is no cause for celebration. Lending is still 50% down on pre-credit crunch volumes."
Reader views (7)
I am allergic to false prices and the "99" on most prices put me off buying as this is some sort of a scam like he old days when we had the 1 and 11, 2 and 11 etc, and if traders are making a profit from so called reduced prices, then, why are they not keeping the full prices at that rate.
T H Leeds
- Thomas Hayes, Leeds UK, 20/08/2009 22:13
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So mortgage lending is up on last month but still down on the figure for a year ago; retail sales are up 3.3% year on year but is this by volume or by value and bearing in mind we need to buy clothing and shoes;home loan advances are up to the highest in nine whole months - Wow. Well none of this will make me throw my hat in the air. Markets may be halting their decline, but we have still got to pay back all the money Brown has borrowed and he has added £8 billion in the last month alone. That is going to be very very difficult for all of us rich and poor alike, especially as Brown has also presided over the debauching of sterling through quantitative easing. If you are young enough - emigrate quick.
- James Elliott, Eastbourne UK, 20/08/2009 19:30
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I can't work out whether Keith Price and Peace Maker are being serious or just having a laugh.
- Charlie, London, 20/08/2009 16:26
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Here we go again; more debt and more credit.
Wait till the government restrictions on interest rates are ended; then its back to today, square one once again.
- Mickinlondon, london., 20/08/2009 15:43
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Oh good, another credit binge - just check if those "necessities" are imported before you buy, though folks! (yeah, right!).
Might even give enough "feel good factor" back to the spendaholic for her to vote Nulabour again next time.......
Best regards, Your flexible friend!
- Darius, London UK, 20/08/2009 15:40
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Nice one Nu Labur...keep up the good work
- Peace Maker, Battersea, 20/08/2009 15:36
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I say well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 20/08/2009 14:50
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