THE long awaited British consumer spending spree may be getting under way sooner than expected just as the somnolent housing market is beginning to show signs of revival.
Growth in the British money supply accelerated sharply last month. The chancellor, Mr Kenneth Clarke, has reduced bank base rates by 0.25 to 6.50 per cent and signalled his intention of making a series of quarter point reductions through 1996.
Bank of England figures detail an unexpected surge in December of the coins and notes (MO) in circulation. Seasonally adjusted monthly MO growth increased from 0.7 to 1.2 per cent, lifting the annualised growth by three percentage points to 5.9 per cent.
Sterling moved ahead on the foreign exchanges, climbing 1.5 pfennigs to DM2.2355 and 0.6 cents to $1.5565, in reaction to the Bank of England's monetary data.
In Dublin the pound ended slightly lower at 103.22p, but appears well supported above 103p.
Acceleration of British monetary growth supports reports from retailers of bumper Christmas trading and first indications of an upturn in the housing market as cheaper mortgages feed through to increasing demand.
Major British banks yesterday reported 10 per cent growth in net mortgage lending to £677 million sterling in November and the Halifax Building Society reported a modest 0.3 per cent increase in average British house prices last month.
The Halifax believes that house prices will strengthen by around 2.0 per cent in 1996 in response to improving confidence in line with growth in incomes.
Some other predictions for the housing market are more bullish. An upsurge in consumer spending on credit and revival of inflation in the housing market are badly needed if John Major's administration is to stand any chance of being re elected at the general election.
Share prices opened lower in first dealings of the new year on City concerns of a Labour victory at any possible early election.
But shares rallied behind the strong opening in Wall Street. The FTSE 100 index closed 1.4 points lower at 3,687.9, having been nearly 20 points lower at one stage.
If monetary growth continues to accelerate, then it may not be necessary to introduce further interest rate reductions to revive the "feel good" factor and improve Mr Major's re election prospects.
