Having slumped a monthly 1.5 percent in November, M4 closed out 2022 with a 0.8 percent drop for its first back-to-back fall since March/April 2018. Annual growth was 1.6 percent, down from 2.5 percent and the weakest print since February 2019. The key private sector lending counterpart edged up a monthly 0.1 percent but this followed sizeable declines in both October and November and still cut its yearly rate from 2.2 percent to just 1.7 percent, equalling a 14-month low.

Excluding intermediate other financial corporations, the picture was no better with M4 down fully 1.2 percent versus November, its third straight fall and trimming annual growth by 1.4 percentage points to 2.7 percent. Similarly-adjusted lending was up 0.1 percent, leaving its yearly rate steady at 1.6 percent.

Elsewhere, mortgage lending (£3.24 billion after £4.26 billion) softened and approvals (35,612 after 46,186) saw their worst level since May 2020, warning of a potentially marked decline in housing demand. More generally, total consumer credit (£0.493 billion after £1.488 billion) was also well down on its November mark, also boding ill for household spending this quarter.

Today's sluggish report is consistent with slowing, if not contracting, private sector activity and should bolster expectations that the top to Bank Rate is not too far off.

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.