GB: M4 Money Supply

Thu Jan 04 03:30:00 CST 2018

Actual Previous
M/M 0.1% 0.6%
Y//Y 3.7% 4.1%

M4 expanded just 0.1 percent on the month in November, down from a 0.6 percent gain in October. Annual growth was 3.7 percent, a 0.4 percentage point drop versus the previous period's outturn. Lending was up a monthly 0.5 percent, easily reversing October's 0.1 percent dip but yearly growth still slipped from 5.6 percent to 5.5 percent.

More importantly, excluding intermediate other financial corporations, M4 posted a solid 0.5 percent monthly increase, lifting annual growth from 4.2 percent to 4.8 percent. Similarly adjusted M4 lending was almost as robust, rising a monthly 0.4 percent although the yearly change here eased by 0.2 percentage points to 4.0 percent.

Elsewhere in the financial data, November's mortgage approvals edged up from 64,887 in October to 65,139 and net mortgage lending was Stg3.499 billion, a slight improvement on the previous period's Stg3.348 billion. Overall net consumer credit followed suit, posting Stg1.400 billion after Stg1.362 billion.

In sum, the data point to a broadly stable financial picture that leaves the economic outlook as clouded as ever. Brexit is clearly hampering would-be economic activity but, at least for now, the economy continues to keep its head above water.

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.