Growth in private-sector lending continued to slow in October, with the increase in lending by credit institutions dropping a percentage point to an annual rate of 18.5 per cent. Laura Slatteryreports.
Mortgage lending growth has slowed to a rate of 15.1 per cent year-on-year, also declining by about one percentage point and continuing a pattern that started in January, according to new figures from the Central Bank.
Total private sector credit advanced by banks rose by €6.6 billion during the month. Of this, €2.4 billion was lent to companies at the International Financial Services Centre (IFSC) to finance offshore transactions and was not associated with domestic activity.
Outstanding private-sector credit in the Irish economy now comes to €366.7 billion, up 1.8 per cent on September.
The monthly rise in residential mortgages was €1.2 billion in October, the same as the month before. The average monthly increase in mortgage lending in 2007 is now €1.4 billion, compared to an average monthly rise of €2 billion last year.
Alan McQuaid, economist at Bloxham Stockbrokers, said yesterday: "Consumer credit growth has slowed quite sharply in recent months and it is hard to see any change in this trend as long as the global credit crisis goes on and the European Central Bank remains reluctant to cut official interest rates." Both overall Irish credit growth and residential mortgage lending growth would continue to slow and come back closer to the European average, he said.
The Central Bank's monthly statistics show that outstanding credit card debt fell slightly in October, as repayments marginally exceeded the value of new spending. Consumers and businesses repaid €196 million more on their credit cards in October than they did the previous month.
There were 140,000 more credit cards in issue in October 2007 than October 2006, which, Mr McQuaid said, could be a sign that consumers want to buy now and pay as late as possible.
"This is not an ideal scenario in the current environment of slowing economic activity," he said.
However, Davy Stockbrokers economist Rossa White said there was no sign of any credit-card distress, with spending on cards slowing to its lowest rate of increase since May 2003.
The lower growth in card spending suggested weaker consumer activity, he noted.
Repayments in credit cards spiked when Special Savings Incentive Accounts matured earlier this year.
Lending through term and revolving loans expanded by €2.7 billion in October, while loans with terms of up to one year increased by €3.5 billion. However, the value of overdrafts fell by €317 million.
