According to data released by the British Bankers Association (BBA), while lending to individuals remained strong in the third quarter, a tail off in September provided another sign of economic slowdown.

New consumer credit in September at a seasonally-adjusted £1.31bn was lower than the £1.42bn lent in August.

Economists say the signs of a slowdown fit with expectation that the Bank of England will move to cut interest rates by 0.25% next week.

But the figures are not weak enough to push the bank for a bigger cut, they say.

Strong quarter

UK banks continued to see strong increases in private lending in the third quarter.

Consumer credit slows from high levels

BBA figures showed overall lending rose by £9.55bn in the three months to September, although slightly less than the £10.2bn increase in the second quarter.

Much of this increase was loans to individuals.

"The major banks saw much stronger demand for credit from individuals in the third quarter which accounted for almost two thirds of their total increase in lending," said BBA director general Tim Sweeney.

September tail-off

However, the monthly breakdown shows that overall lending to individuals was much stronger in July, and tailed off through August and September, adding weight to the view that consumer confidence is running out of steam as the economy slows down.

Michael Dicks, analyst at Lehman Brothers, says the easing in consumer credit expansion is consistent with recent indicators showing consumer confidence slipping.

Mr Dicks said he was confident that consumer spending would continue to decline in the fourth quarter, and should have a considerable impact on economic growth.

Breaking down individual lending, net mortgage loans rose by £2.94bn compared with £2.42bn the previous quarter.

Consumer credit rose by £2.12bn, compared with £1.67bn rise in the second quarter, while credit card lending was up £601m on the previous quarter.

Business loans

Lending to private companies in the third quarter rose by almost 20% more than in the previous three months and is expected to well exceed the levels of 1996 or 1997, the BBA said.