M4 excluding intermediate other financial corporations (i.e. M4ex) rose by 2.9% annualised in the three months to October. Growth remains weak by historical standards but is sufficient to support solid nominal income expansion because of a rising trend in the velocity of circulation, caused partly by negative real interest rates. (Velocity – defined as the ratio of nominal GDP to M4ex – increased by an annual 4.4% in the third quarter.)<\/p>\n<\/li>\n
Within M4ex, money holdings of private non-financial corporations rose by 6.6% annualised in the latest three months. Stripping out the overleveraged property sector, the corporate liquidity ratio (i.e. non-financial companies’ sterling and foreign currency deposits divided by their bank borrowing) is at a record high in data extending back to 1998. The ratio leads business spending (i.e. fixed investment plus stockbuilding), which is up by 25.7% from a trough in the fourth quarter of last year.<\/p>\n<\/li>\n
Household M4 growth – 2.6% annualised in the three months to October – continues to be depressed by a portfolio switch out of bank and building society deposits into higher-yielding investments. Retail inflows to unit trusts and OEICs totalled £24.9 billion in the 12 months to September, equivalent to 2.5% of household money holdings (October figures are released on Wednesday).<\/p>\n<\/li>\n
Two considerations suggest a slowdown in GDP growth from 3.9% annualised in the second and third quarters. First, while M4ex is rising at a satisfactory pace, faster price increases – due to the coming VAT hike and higher food and energy costs – will cut real expansion, implying less monetary stimulus for economic activity. Secondly, narrow money has slowed recently, with annual M1 expansion falling from 8.3% in June to 3.0% in October.<\/p>\n<\/li>\n<\/ul>\n
UK monetary trends are consistent with an ongoing economic recovery but growth is likely to moderate from its recent bumper pace: M4 excluding intermediate other financial corporations (i.e. M4ex) rose by 2.9% annualised in the three months to October. Growth remains weak by historical standards but is sufficient to support solid nominal income expansion because of […]<\/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-3120","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\/3120","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=3120"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3120\/revisions"}],"predecessor-version":[{"id":5429,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3120\/revisions\/5429"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"\/storage\/graphs\/uk-money-supply291110.gif?__SQUARESPACE_CACHEVERSION=1291035760908\")
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