UK Monetary Growth Accelerates Strongly in January
Source: Bank of England
Source: Bank of England
Panic over. You will recall I was a tad alarmed that the three month annualised rate of growth in M4X slipped below zero in December. However, it now appears that this was largely because of the Christmas period interfering with the Bank of England’s asset purchase programme—essentially it fell behind on its pro-rata purchases. The good news, according to this morning’s figures, is that in playing catch-up in January monetary growth has rebounded, with the three month annualised rate in M4X (broad money excluding intermediate other financial companies) jumping back to 4.2%, whilst the annual rate climbed to a two-and-a-half year high of 2.9%. Although both are less than the 5% I estimate to be consistent with trend growth, it is clearly a step in the right direction. And with bank lending to the private sector excluding intermediate OFCs all of a sudden showing signs of life, (suggesting the banks have sufficiently rebuilt their capital to start expanding their risk assets again), increasing by an annualised 4.2% in the latest three months (strongest since May 2009), my guess is that monetary growth will accelerate further in the year ahead. I am therefore sticking with my view that not only will the UK avoid a double dip recession, but growth will surprise on the upside in 2012.
29th February 2012
John Clarke - CIO
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