It’s not been a good week for UK economy. Whilst other major economies look to be exiting their recessions, the UK experienced its 6th quarter of negative growth (UK still in Recession)
Money Supply data gives a rough guide to economic activity. I say rough guide because it can be hard to measure, and often changes in the money supply may be due to different factors such as changes in the way people bank. Another complication is that the Bank of England publish many different versions of the Money Supply; it can be hard to know which one to use.
M4 Money Supply data is published here at the Bank of England
However, one measure of adjusted M4 shows that M4 fell by 0.9pc in September, resulting in an annual fall of 1.7pc . This is the worst figure since comparable statistics began. A sign of the sluggish economic activity
This fall in the Money Supply has occured despite £160bn of asset purchased by the Bank of England. In theory, creating money to buy illiquid assets should help to boost the Money Supply (see Asset Purchase Scheme and Money Supply) This suggests that the government may need to approve further measures of quantitative easing.
It also suggests that the link between creating money and inflation is complicated.
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“Money Supply data gives a rough guide to economic activity.”
All data is too rough to measure economic activity. But it appears it won’t be that way forever. Check out equilcurrency.
[...] inflation. When Quantitative easing was announced, some immediately feared future inflation. But, recent money supply figures suggest inflationary pressures are almost non-existent. In other words, it can be dangerous to fear [...]
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