The months preceding the Christmas period are always difficult for those on low incomes, and even middle-income earners are feeling the pinch as November takes hold. The current economic climate is not a favourable one – despite the government’s insistence that the recession is officially over – and the latest figures suggest that more people are turning to credit as a way of tiding themselves over.

September saw a surprisingly high level of debt, with UK consumers taking on borrowing on credit cards and loans to the tune of £1.7billion. This figure includes the biggest increase in unsecured loans for four and a half years. The news has been met with two responses: optimism that consumers are returning to credit and, therefore, spending, and concern that many people are taking out expensive and potentially crippling loans.

Wage rises remain far below the rate of inflation, a problem that manifests in more ways than one, so families are finding it hard to make ends meet. A credit card is a sensible way of borrowing money if it is used carefully, but any overdue payments can be very high indeed. This is also true of short term, so called ‘payday loans’ which are currently the subject of much controversy.

More Prepared to Spend

Economists have expressed the opinion that the latest trends in borrowing are signs of consumer’s willingness to spend. However, some are warning against taking too much notice of one month’s figures, as Howard Archer of IHS Global Insight told The Guardian:

“The marked rise in consumer credit in September is potentially notable as consumers’ appetite for taking on new borrowing has been limited for some considerable time, while there has also been an ongoing strong desire of many consumers to reduce their debt. If consumers are becoming more prepared to spend – helped by recent healthy employment growth, lower overall inflation and an edging up in earnings growth from the lows seen earlier in 2012 – then there is a real chance the economy can continue to grow following the third-quarter rebound in GDP.”

However, researchers Capital Economics had a different opinion, with their UK economist Martin Beck explaining:

“The prominence of growth in consumer credit suggests that it may reflect households seeking to maintain spending in the face of continued declines in real earnings. So September’s numbers may be more indicative of the economy’s weakness than any resurgence in its strength.”

There is a sense that the economy is on the up, but that more time is needed before we can claim a major step away from recession.