LONDON—The U.K. public sector borrowed £16.2 billion ($25.44 billion) in September, the Office for National Statistics said Wednesday, with central-government spending rising sharply. Gross mortgage lending grew at a marginally slower pace in September from August and was the lowest September total in 10 years.
The September data means the U.K. has borrowed £73.5 billion so far this financial year, excluding the costs of the bank rescues. That compares with £77.4 billion in the same period last year. The financial year started in April. September's public-sector net borrowing was a record for that month and compared to £15.5 billion in September 2009.
The pound fell after the data but quickly regained lost ground. Gilt prices also slid back from session highs, with December gilt futures at 124.24 versus 124.49 before the data.
The data comes ahead of Chancellor of the Exchequer George Osborne's spending review, due at 1130 GMT Wednesday, which will signal the areas of public spending to be cut. It is expected to order cuts of 25% from most government departments over the next four years. The government has promised to find £83 billion in cuts by 2015.
The government is targeting a full-year PSNB of £149 billion excluding financial sector interventions. The ONS said that central-government non-capital expenditure rose 10.2% in September, the highest annual jump since March. Central government tax receipts were up 7.8%.
The September data was disappointing said Alan Clarke, U.K. economist at BNP Paribas. He said that for most of the financial year to date, net borrowing had been around £1 billion lower than the same month last year, but that trend has reversed in the last few months.
"At the very least we are ahead of where we thought we would be so the public finances are improving but this very much reinforces why such unpleasant spending cuts that we expect to hear of today are necessary," Mr. Clarke said.
Howard Archer, chief U.K. and European economist at IHS Global Insight, said at the current rate, he believes borrowing will be £148 billion in the financial year—just under the target.
The ONS said that central government non-capital expenditure rose 10.2% in September , the highest annual jump since March. Once again, there was a sharp rise in interest payments while benefit payments were up 5.6% and general spending was up 8% since last year.
The public-sector net-cash requirement was £20.7 billion in September compared with £19.2 billion a year ago. Public-sector net debt stood at 57.2% of gross domestic product at the end of September excluding the costs of the bank rescues. Including those costs, it was 64.6% of GDP.
The 2010 second-half mortgage-lending figures will likely remain subdued compared with the unexpected recovery in the latter half of 2009, the Council of Mortgage Lenders reported.
The CML's monthly release showed gross mortgage lending rose £12 billion in September, compared with a rise of £12.1 billion in August. That was the lowest September rise since 2000 when lending grew by £10 billion. It was down 7% from the £12.9 billion increase in September 2009. The August data were raised from an originally reported £11.4 billion.
"Lending volumes do not seem likely to increase substantially towards the end of the year," CML Director General Paul Coogan said. "Funding pressures on lenders remain, and the practical implications of government and public spending cuts are beginning to emerge, with a resulting impact on consumer confidence."
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