British mortgage approvals more than quadrupled last month from May’s record low and households showed signs of spending more, as the economy began to open up from the coronavirus lockdown.

Lenders approved 40,010 loans to buy homes in June, up from May’s record-low reading of 9,273, Bank of England (BoE) data showed. This was a bigger increase than economists polled by Reuters had expected, though approvals are still down 46% from their level in February.

Households also repaid a net 86 million pounds ($111 million) of unsecured debt, the lowest amount since February and much less than the 2 billion pounds expected by economists, in a sign of a return to old spending habits as the lockdown eased.

The figures point to some recovery in British consumer demand, though they give little clue as to whether there will be a full recovery to pre-COVID levels.

“We expect cautious consumers, drawing down their increased savings only gradually in the coming months, which should soften the initial post-lockdown sharp pace of recovery,” Morgan Stanley economists Jacob Nell and Bruna Skarica said.

Few households have yet been hit by a big rise in unemployment which is forecast for later this year with the end of government job-support measures that have helped more than 9 million private-sector employees.

Official data last week showed British retail sales broadly returned to their level of a year ago in June after non-essential shops reopened in England, though there were marked differences between sectors.

Retail sales make up only part of overall consumer demand, however, and many bars and restaurants reported subdued trading after reopening on July 4.

Finance minister Rishi Sunak announced temporary tax cuts for both the hospitality sector and house purchases this month, in a bid to revive growth after official data showed only a weak rebound in May when the lockdown first began to lift.

Wednesday’s data showed net mortgage lending - which typically lags a month behind mortgage approvals - grew by 1.893 billion pounds in June, broadly in line with forecasts.

M4 money supply growth, excluding intermediate other financial companies, rose by a record 11.9% on the year, reflecting government-backed emergency credit schemes for businesses, which so far have lent almost 50 billion pounds.

But consumer borrowing in June was 3.6% lower than a year earlier, a record drop when measured year-on-year, although the pace of decline was slower than during the March-May period.

Meanwhile, British retailers discounted their goods less in July than the month before, after consumer demand picked up in many sectors as coronavirus lockdown restrictions eased, data from the British Retail Consortium showed.

Average shop prices in July were 1.3% lower than a year before, compared with 1.6% lower in June and a record 2.4% fall in May.

July’s reading was driven by a smaller price fall of 2.9% for non-food prices in July, down from a 3.4% drop in June.

“Sectors which saw a release of pent-up demand, such as electricals and furniture, saw fewer promotions,” BRC chief executive Helen Dickinson said.

But other sectors such as health and beauty remained under significant pressure, she added.

Inflation in the food sector - one of the few areas to increase sales during lockdown, as more British people ate at home - remained unchanged at 1.5%.

The data broadly tally with official data last week which showed overall retail spending rebounded to around its pre-COVID level in June after a previous slump of more than 20%, but that there were marked differences between sectors.

Supermarkets, home hardware and online stores have done well, while sales of clothing and many other less essential goods remain significantly down compared with a year ago.

Figures from the Confederation of British Industry suggested a similar pattern continued in early July. The BRC survey was conducted between July 1 and July 7.

A gauge of British retail sales surged in July to its highest level in over a year as more of the economy reopened following the coronavirus lockdown, driven mostly by grocery sales, the survey showed.

The Confederation of British Industry’s (CBI) monthly retail sales balance rose to +4 from -37 in June, its highest since April 2019 but still signalling only modest year-on-year growth in sales.

Reuters