M4 slowed in November. A 0.4 percent monthly rise was well short of October's unrevised 1.1 percent bounce and reduced annual growth by a couple of ticks to 6.4 percent. However, the yearly rate was still the second highest seen in 2016 so far and M4 lending actually accelerated, posting a 0.6 percent monthly increase, up from 0.1 percent in October and a 5-month high.
Excluding intermediate other financial corporations M4 contracted 0.1 percent on the month, its first drop since April. The 3-month annualised rate also decelerated from 7.2 percent to 4.2 percent, similarly its weakest mark since April. However, adjusted lending expanded a monthly 0.5 percent, more than reversing October's 0.2 percent decline to stabilise annual growth at a respectable enough 6.1 percent.
Elsewhere the financial data were strong with mortgage approvals (67,505) climbing to their highest mark since March and net consumer credit (Stg1.926 billion) recording its healthiest rise since March 2005.
Overall then, today's money and associated financial data again paint a relatively upbeat picture of underlying UK economic trends. There is nothing here to suggest that Brexit worries are about to have any major impact on business or consumer behaviour.
M4 is the Bank of England's main broad measure of money supply. There is no target for M4 and in practice the central bank tends to follow an adjusted measure that excludes intermediate other financial corporations in order to get a handle on current underlying trends. The M4 private sector lending counterpart is the most closely watched aspect of the report.
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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