GB: M4 Money Supply

Wed Nov 29 03:30:00 CST 2017

Actual Previous Revised
M/M 0.6% -0.2% -0.1%
Y//Y 4.1% 4.8%

Broad money rebounded well in October. Following a slightly smaller revised 0.1 percent fall in September, M4 expanded a monthly 0.6 percent although base effects still saw annual growth slide from 4.6 percent to 4.1 percent. M4 lending was less bullish, declining 0.3 percent versus September, its first fall since February.

In fact, excluding intermediate other financial corporations, M4 was up just 0.2 percent on the month, matching its September pace but still making for a 0.3 percentage point dip in yearly growth to 4.2 percent, its weakest mark since January 2016. Similarly adjusted lending edged up a monthly 0.1 percent, but this was enough to raise its annual rate from 3.9 percent to 4.2 percent, a 5-month high.

Elsewhere, the financial data pointed to some deceleration in economic activity. Hence, October mortgage approvals fell from 66,111 to 64,575, their softest reading since September last year and that despite a new record low for mortgage rates. Additionally, net mortgage lending fell to Stg3.392 billion from Stg3.752 billion while unsecured consumer credit eased a touch from Stg1.484 billion to Stg1.451 billion.

Overall today's data are in line with some further cooling in the housing market but suggest that in general consumer spending is probably holding up reasonably well.

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.