{"id":3052,"date":"2010-08-31T10:54:13","date_gmt":"2010-08-31T10:54:13","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3052"},"modified":"2025-03-27T15:49:06","modified_gmt":"2025-03-27T15:49:06","slug":"uk-monetary-trends-still-encouraging-despite-july-stall","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3052","title":{"rendered":"UK monetary trends still encouraging despite July stall"},"content":{"rendered":"<p>Key UK money supply measures were unchanged in July but have grown at a faster pace since early 2010, supporting hopes of&nbsp;a continued&nbsp;economic recovery. Corporate liquidity, in particular, has improved further. Unusually, households failed to expand their money holdings last month, probably reflecting a combination of low interest credited, an ongoing switch into mutual funds and use of spare cash to repay borrowing.<\/p>\n<ul>\n<li>\n<p>Broad money (i.e. M4 holdings of households, private non-financial corporations and financial corporations excluding intermediaries) stagnated in July but has still grown at solid annualised rates of 5.6% and 5.9% over the last three and six months respectively.<\/p>\n<\/li>\n<li>\n<p>Narrow money M1, comprising currency and overnight deposits, was also unchanged but has grown by 8.3% annualised over the last three months and by 7.6% over the last year. M1 is universally ignored by economists but is usually a better leading indicator than broad money: it contracted as the economy entered a recession but recovered strongly in mid 2009 ahead of the current GDP upswing &ndash; see first chart.<\/p>\n<\/li>\n<li>\n<p>Within broad money, non-financial companies&#8217; holdings rose by 0.9% in July, pushing annual growth up to 4.0%. Excluding the troubled real estate sector, the corporate liquidity ratio (i.e. bank deposits divided by bank borrowing) is at the top of its historical range, suggesting a continued recovery in business spending &ndash; second chart.<\/p>\n<\/li>\n<li>\n<p>Very unusually, households&#8217; broad money holdings were unchanged in July &ndash; the only previous month since 1997 when they failed to expand was October 2008, when financial stability concerns led to a flood of cash out of banks and building societies into Treasury bills, gilts and national savings instruments. (Monthly statistics begin in 1997; quarterly figures going back to 1963 have never recorded a fall.) There has been no such &#8220;safe-haven&#8221; flow recently but households have been switching into mutual funds, net retail sales of which totalled &pound;2.1 billion in June (July figures are due next week). In addition, interest credited to accounts has slumped in line with deposit rates, while&nbsp;higher lending \/ deposit spreads may be encouraging some borrowers to use any spare cash to repay debt.<\/p>\n<\/li>\n<li>\n<p>There was broad demand for gilts in July, with banks, foreign investors and private non-banks buying respectively &pound;4.8 billion, &pound;5.6 billion and &pound;6.7 billion. Banks have increased their holdings by &pound;25.7 billion since &#8220;QE&#8221; was suspended in January.&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-money310810.gif?__SQUARESPACE_CACHEVERSION=1283252929372\" alt=\"\" \/><\/span><\/span><br \/><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-business310810.gif?__SQUARESPACE_CACHEVERSION=1283253483919\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key UK money supply measures were unchanged in July but have grown at a faster pace since early 2010, supporting hopes of&nbsp;a continued&nbsp;economic recovery. Corporate liquidity, in particular, has improved further. Unusually, households failed to expand their money holdings last month, probably reflecting a combination of low interest credited, an ongoing switch into mutual funds [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3052","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3052","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3052"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3052\/revisions"}],"predecessor-version":[{"id":5361,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3052\/revisions\/5361"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3052"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3052"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3052"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}