The two charts set out below emphasize the importance of credit growth (i.e. the credit impulse) as it affects private sector spending in the U.K. The credit impulse concept is defined as the “the change in new credit issued as a % of GDP”. Its importance relates to the fact that private sector spending is very closely correlated with the private sector credit impulse.

Hence changes in spending are dependent on changes in net new lending or, equivalently, on the acceleration of credit growth. In other words, the credit impulse (a flow measure) differs from relying on credit outstanding, which is a stock measure.

As the following two charts illustrate, the credit impulse in the United Kingdom turned sharply negative in the first quarter of 2018. In other words, the slowing in the credit impulse foreshadows slower British economic growth.

Consumer Confidence Is Declining In the United Kingdom, Also Blame Brexit