BUSINESSES in the south have been given a shot in the arm by the chief economist of one of Britain's top banks.

An upbeat prediction for the regional economy across the south coast will add to the air of optimism already being shown by thousands of firms and companies who are cashing in on the consumer feel-good factor.

Jeremy Peat, the group chief economist at the Royal Bank of Scotland, said: "The Solent and Wessex economies are performing well and are favourably placed to do even better as the global economy emerges from the doldrums.

"The enhanced prospects for the global economy, as the US recovery gathers pace, are particularly welcome.

"The buoyancy of the area has been underpinned by a particularly robust property market and healthy consumer demand.

"Residential property demand has been exceptionally strong."

Mr Peats' made his comments at a business lunch at the Rose Bowl, home to Hampshire Cricket, near Southampton.

He added: "We remain reliant upon the US recovery to provide the impetus for a return to sustained and strong world growth in the remainder of this year and into 2004.

"We are seeing distinct signs that both the UK and US economies are edging back to stronger and more balanced growth. The UK economy has continued to perform respectably.

"Buoyant domestic demand and strong government spending have underpinned our economy through the period of weakness in the external environment.

"Low interest rates have stimulated the consumer sector, directly and via equity release and a buoyant housing market.

"Increases in public expenditure have also had a significant impact on maintaining domestic momentum and underpinning the labour market.

"Improved financial data and survey responses suggest that the long-awaited pick-up in business investment is on the horizon.

"Our forecast is for slightly-below trend growth in 2003, before a return to trend in 2004 - by which time re-balancing should be well under way.

"As domestic demand in the Eurozone remains extremely weak, we are very much reliant on the US providing the global engine of growth.

"However, US labour market data is still giving some cause for concern, so a return to sustained growth there is not yet a done deal."

Mr Peat's words about how the housing boom is underpinning the economy were borne out today with new figures showing that mortgage lending remained close to record levels last month, with little easing in consumers' appetite for accumulating debt.

Data from the Bank of England put August's rise in mortgage lending at £7.7 billion, down from the previous months record gain of £8.2 billion.

With interest rates remaining low, the number of loans approved for house purchase in August stood at 120,000, compared with the

seasonally-adjusted three-month average in July of 105,000.

The BoE said consumer credit, which includes borrowing on credit cards and other loans, grew by £1.6 billion in August - £100m higher than the rise in July.