GB: M4 Money Supply

Mon Oct 30 04:30:00 CDT 2017

Actual Previous Revised
M/M -0.2% 0.9% 1.1%
Y//Y 4.8% 4.4%

Broad money growth was soft in September. However, a 0.2 percent monthly contraction did little to dent the previous period's upwardly revised 1.1 percent spurt and annual growth climbed from 4.4 percent to 4.8 percent, a 3-month high. Moreover, M4 lending held up well, increasing 0.5 percent on the month, its seventh consecutive gain. Yearly growth edged up to 6.1 percent, its strongest print since April.

Excluding intermediate other financial corporations, the picture was also quite positive with M4 rising a monthly 0.1 percent and adjusted lending advancing 0.5 percent.

However, elsewhere the financial data were quite mixed. On the negative side mortgage approvals in September fell to 66,232 from 67,232 in August. Net consumer credit (Stg1.606 billion after Stg1.760 billion) and net mortgage lending (Stg3.848 billion after Stg3.929 billion) also slipped but credit card lending posted its largest rise since May 2016.

All in all, the latest money figures are unlikely to have a major impact on the outcome of this week's BoE MPC meeting. The central bank wants to see slower consumer borrowing and the housing market remains on course for a soft landing. Thursday's vote still looks likely to be very close.

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.