M4 expanded 0.4 percent on the month in November, down from an unrevised 0.6 percent in October. Annual growth was 0.5 percent, up from 0.2 percent last time.
However, the key private sector lending counterpart advanced only 0.2 percent and, despite accelerating, annual growth of 0.8 percent was still only sluggish. Excluding intermediate other financial corporations, M4 was up 0.3 percent versus October which left annual yearly growth unchanged at 4.5 percent. Even so, at 5.9 percent, the annualised gain over the last three months jumped from 3.6 percent to 5.9 percent, its strongest reading since the start of the year. Similarly, adjusted M4 lending expanded 0.5 percent on the month and 3.5 percent from a year ago after a 3.3 percent rate last time.
The rest of the financial data pointed to a very strong month for the UK housing market. Hence, mortgage approvals climbed from 69,867 to 70,410 and net mortgage lending was up Stg3.873 billion, its sharpest gain since April 2008. November's average mortgage rate fell from 3.03 percent to 3.01 percent, a new record low for the series which began in January 1999.
The November data suggest that underlying financial conditions remain moderately supportive of a sustained UK economic recovery. Financial markets will likely take most notice of the renewed buoyancy of the housing market. This is unlikely to have any immediate implications for Bank Rate but could yet prove to be the tipping point for a monetary tightening later in the year.
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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