Broad money (i.e. M4 excluding intermediate other financial corporations) rose by 2.0% in the year to September and by 2.6% annualised during the third quarter. Growth remains slow by recent standards but must be assessed against a rising trend in velocity – up by about 4% over the last year versus an average decline of 0.5% per annum over the last half-century. (Note: monthly broad money figures show a rise of only 0.3% annualised in the three months to September but the Bank is reviewing its seasonal adjustments and recommends focusing on quarterly data.)<\/p>\n<\/li>\n
Within broad money, holdings of private non-financial corporations rose by an annual 5.2% in September, up from 3.4% in June. With companies continuing to repay debt, the corporate liquidity ratio – sterling and foreign currency deposits divided by bank borrowing – reached its highest level since the second quarter of 2007. Excluding the property sector, the liquidity ratio is at a new record in data extending back to 1998 – see chart.<\/p>\n<\/li>\n
Money holdings of households rose by an annual 2.8%, down from 3.0% in June. Growth continues to be restrained by a portfolio shift into mutual funds: net retail buying of unit trusts and OEICs totalled £25.3 billion in the 12 months to August, equivalent to 2.5% of household broad money (September figures are released next week). The recent slowdown may partly reflect a fall in the saving ratio.<\/p>\n<\/li>\n
While nominal broad money trends remain satisfactory, faster price increases – due to the coming VAT hike and rising food and energy costs – may act as a drag on real expansion, implying less monetary stimulus for economic growth. Narrow money trends may be signalling a peak in economic momentum: annual M1 expansion slowed from 8.3% in June to 2.6% in September, although this partly reflects an unfavourable base effect and may prove temporary.<\/p>\n<\/li>\n
Overseas investors bought a further £8.5 billion of gilts in September, bringing the year-to-date total to £62.7 billion – 48% of net issuance. Banks, by contrast, reduced their holdings slightly in August and September, possibly in anticipation of a “QE2” boost to their reserve positions at the Bank of England – higher reserves imply less need for gilt purchases to meet liquidity targets.\ufeff<\/p>\n<\/li>\n<\/ul>\n
The latest monetary statistics are consistent with a continuing business-led recovery but economic growth is likely to moderate from its recent strong pace: Broad money (i.e. M4 excluding intermediate other financial corporations) rose by 2.0% in the year to September and by 2.6% annualised during the third quarter. Growth remains slow by recent standards but […]<\/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-3067","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\/3067","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=3067"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3067\/revisions"}],"predecessor-version":[{"id":5376,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3067\/revisions\/5376"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3067"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3067"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3067"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"\/storage\/graphs\/uk-corp-291010.gif?__SQUARESPACE_CACHEVERSION=1288356510751\")
<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"