Credit growth accelerates 15%

FEARS of a retail slow down in December compared to previous years are not reflected in the credit figures released yesterday by the Central Bank of Ireland.

They show an acceleration in credit growth from 13.9% in November to 15% last month.

According to figures released by the Central Bank the main driving force was the continuing strong demand for home loans.

That resulted in a further significant rise in mortgage lending that went form 21.8% in November to 23.1% in December as the demand for homes, failed to reflect the apparent slow down across the economy.

“This is the fastest annual growth since January 2001 and well above growth rates of about 18% in early 2002, according to the Central Bank.

Excluding mortgages the annual adjusted growth rate for private sector credit edged up somewhat from 8.1% in November to 9%.

With market interest rates easing further during the month at the shorter end of the market the Central Bank said this indicated a further anticipation of a reduction in official interest rates in the months ahead.

Some economists suggest a cut of 0.5% is on the cards if the weak growth figures for the Euro zone do not improve soon.

Last year it looked as if the Germany economy could mange growth of just 0.2% in GDP terms and there is evidence to suggest the German Central Bank wants to see the ECB cut rates again in the near future.

Events in Iraq could also have as strong bearing on how the interest rate scene p.ans out in the near terms with economists suggesting a protracted war would do serious damage to global economic growth.

Hope is being pinned on the US to drive economic output in 2003.

But as the war factor continues to undermine optimism in the US forecasters say growth there in 2003 will be no more than 2.5%.

That is a sharp reduction from earlier expectation when optimistic forecasts were earlier projecting growth of over 3% in the current year as recovery in the US began to pick up.

Economists ruled out a V shaped turnaround and economists here say interest rate policy could retain a downward bias for some time.

With US rates at a 40 year low of 1.25% commentators thought a further cut in rates impossible.

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