Money supply at its weakest in four years
BRITAIN’S broad money supply (M4) contracted in June by 0.2 per cent, the weakest reading since June 2005, figures from the Bank of England showed yesterday, putting a question mark over the effectiveness of the Bank’s quantitative easing (QE).
The data showed the supply of broad money fell by £3.2bn last month and the annual growth fell to 14.2 per cent from 16.7 per cent in May.
Despite a rise in the monetary base – banks’ reserves plus notes and coins in circulation – to £200bn from £76bn before the start of QE, the annual growth of total M4 lending dropped in June to 11.2 per cent from 13.7 per cent in May.
The Bank’s separate July Trends in Lending report also showed that the flow of net lending to UK businesses remained negative in May, falling by £3.4bn.
Net flows of consumer credit were also weak in May, while none of the major lenders planned to expand the availability of consumer credit.