Broad money dipped 0.1 percent on the month in May having been flat in April. This was the first contraction in M4 since January and halved yearly growth to 0.3 percent, a 3-month low. Quarterly growth was 2.8 percent, well down on the 5.5 percent posted in the period to April. M4 lending also fell a monthly 0.1 percent but remained 1.0 percent higher on the year.

By contrast, excluding intermediate other financial institutions, M4 rose 0.1 percent versus April, its fourth straight advance. Similarly-adjusted lending was only stable but 3-monthly annualised growth still picked up to 2.0 percent.

Elsewhere the financial data were again mixed. In the housing market, mortgage approvals slipped from 60,821 to a 4-month low of 59,990 while lending cooled from £2.23 billion to £1.21 billion. However, overall consumer credit rose £1.513 billion, nearly double the £0.79 billion posted in April.

Once again, the data are mixed but overall would seem to be consistent with a gradual recovery in economic activity.

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.