Headline broad money remained decidedly sluggish in December. A second successive minimal 0.1 percent monthly increase saw annual growth of M4 increase by 1.6 percentage points but, at minus 1.1 percent, it was below zero for an eleventh consecutive month. M4 lending was marginally stronger, posting a 0.2 percent advance over November to slow its yearly rate of decline from 5.1 percent to 3.9 percent.
However, the underlying picture was significantly brighter. Hence, excluding intermediate other financial corporations M4 rose 1.0 percent versus mid-quarter, easily its best performance of the year and, at 4.2 percent, its annual growth rate was the fastest since November 2013. Even so adjusted lending still only expanded 0.3 percent on the month and a 0.6 percent yearly rise was just a tick above its November pace.
Amongst the rest of the financial data the slowdown in the housing market paused as mortgage applications jumped 2.2 percent on the month to 60,275, their first increase since June and their highest level since September. That said, net mortgage lending slowed from Stg1.915 billion in November to Stg1.612 billion and a Stg0.578 billion rise in net consumer credit was less than half the previous month's gain.
Nonetheless, on balance the December data are moderately upbeat and increase the chances of the UK economy continuing to expand at a relatively healthy rate this quarter.
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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