GB: M4 Money Supply

Tue May 01 03:30:00 CDT 2018

Actual Previous Revised
M/M -1.4% -0.3% -0.4%
Y//Y 2.2% 4.1% 4.2%

Broad money was weak in March. M4 contracted 1.4 percent on the month following a slightly steeper revised 0.4 percent drop in February. This reduced annual growth from 4.2 percent to 2.2 percent, its slowest rate since May 2016. The key M4 lending counterpart edged 0.1 percent firmer versus mid-quarter but this still saw its yearly rate slide 0.8 percentage points to 3.1 percent.

Excluding intermediate other financial corporations, the picture was rather brighter but still soft. Hence, adjusted M4 was flat on the month which led its annual growth to drop from 4.5 percent to 3.8 percent. Adjusted lending climbed a monthly 0.6 percent, lowering its yearly change from 3.8 percent to 3.6 percent.

Elsewhere, the financial statistics were generally quite sluggish too. In particular, March net consumer credit (Stg254 million) saw its smallest increase since November 2012 and mortgage approvals fell from 63,781 to 62,914. However, mortgage lending (Stg3.968 billion after Stg3.887 billion) was a little firmer.

Overall, today's money data would seem to be in keeping with a general slowdown in economic growth and so provide further reason for the BoE MPC's doves to get their way at next week's policy-setting meeting.

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.