GB: M4 Money Supply

Thu May 04 03:30:00 CDT 2017

Actual Previous Revised
M/M 0.3% -0.3% -0.2%
Y//Y 6.6% 5.7% 5.9%

M4 expanded 0.3 percent on the month in March to lift annual growth from a revised 5.9 percent to 6.6 percent, reversing a half of February's fall. M4 lending also rebounded with a 0.8 percent monthly gain that comfortably more than offset the previous period's 0.2 percent decline.

Excluding intermediate other financial corporations, the picture was similarly positive with adjusted M4 up 0.5 percent on the month, its fourth increase in a row and similarly adjusted lending 0.8 percent firmer after a 0.5 percent advance last time.

However, elsewhere in the financial data there was fresh evidence of a cooling housing market as mortgage approvals dropped from 67.936 in February to 66,837, their weakest print since September 2016. A dip in net mortgage lending from Stg3.386 billion to Stg3.105 billion was consistent with this view. Even so, net consumer credit increased Stg1.624 billion, up from Stg1.476 billion, so overall credit developments were still quite positive.

In sum, the financial statistics are probably in line with a trend moderation in UK growth but not a major slowdown. This should not trouble the BoE MPC.

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.