M4 was unchanged for a second successive month in November to steepen its annual rate of decline from 2.6 percent to 2.8 percent, easily its weakest performance of the year to date.
M4 lending continued to weigh on headline growth, falling a further 0.2 percent from the start of the quarter, its fourth decline in as many months. The yearly contraction in lending now stands at 5.1 percent, some 0.4 percentage points steeper than last time.
However, excluding intermediate other financial corporations, the picture was rather stronger. Hence, adjusted M4 was up 0.2 percent on the month, its seventh increase since March. Annual growth of 2.9 percent was 0.4 percentage points short of the October rate but the annualised rate of expansion over the last three months accelerated to 2.9 percent from 2.5 percent.
Elsewhere in the financial data, there were additional signs of a cooling housing market. In particular, mortgage approvals dropped from 59,511 to 59,029 in November for their lowest outturn in seventeen months and are now some 56 percent below the high posted in November 2003. That said, net mortgage lending picked up from Stg1.595 billion to Stg2.059 billion and, at Stg1.252 billion, total net consumer credit was also above its October mark (Stg1.085 billion).
Overall today's report offers mixed signals about UK financial conditions. Outside of the mortgage market lending is still disappointingly sluggish but this has not prevented what has been a solid economic recovery in recent quarters. However, whether or not the upswing in activity can continue at a respectable pace through 2015 without some improvement in the financials remains to be seen.
M4 is the main broad measure of money supply in the UK. The central bank's preferred measure excludes economically irrelevant financial transactions.
M4 is similar to the M3 measure used in some other countries. M4 includes everything in M2 (also called the retail component of M4) plus other deposits with an original maturity of up to five years; other claims on financial institutions such as repos and bank acceptances; debt instruments issued by financial institutions including commercial paper and bonds with a maturity of up to five years. Understanding the role of money in the economy has always been an important issue for policymakers. And the pickup in broad money growth and decline in credit spreads over the past three years together with more recent financial market turbulence has made it a particularly pertinent issue. Monetary data can potentially provide important corroborative or incremental information about the outlook for inflation. Quantitative easing is essentially a policy aimed at boosting money supply.
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