GB: M4 Money Supply

Thu May 31 03:30:00 CDT 2018

Actual Previous
M/M 0.2% -1.4%
Y//Y 1.1% 2.2%

Broad money rebounded in April. However, following an unrevised 1.4 percent monthly fall in March, M4 only edged 0.2 percent firmer which saw annual growth halved to just 1.1 percent. Within this, M4 lending was flat on the month and 2.5 percent higher on the year, down from a 3.1 percent increase last time.

Excluding other intermediate financial corporations, the picture was weaker still. Hence, adjusted M4 showed no monthly change, reducing yearly growth by 0.5 percentage points to 3.3 percent, its softest outturn since November 2014. Similarly-adjusted lending contracted a monthly 0.3 percent.

Elsewhere in the financial data, mortgage approvals dipped from 62,802 in March to 62,455, their lowest mark since December 2017, while net secured lending was Stg3.894 billion, a small decrease versus the previous Stg3.959 billion. However, overall net consumer credit jumped Stg1.832 billion having slumped to just Stg425 million last time.

As ever the financial statistics paint a rather mixed picture. Nonetheless, with adjusted M4 growth now running at an annualised quarterly rate of minus 0.7 percent, down from 5.4 percent at the start of the year, in general monetary developments would seem to be in line with some ongoing loss of economic momentum.

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.