Previous posts expressed optimism about UK economic prospects based partly on solid money / credit trends. GDP is currently estimated to have risen by 0.4% in the first quarter and April data for industrial / construction output and retail sales suggest a respectable start to the current quarter – see Friday’s post.
Six-month growth of real narrow money, as measured by non-financial M1, was stable in April at its highest level since December 2013. This stability, however, conceals a further pick-up in household real M1 expansion offset by a sharp slowdown in holdings of private non-financial corporations (PNFCs) – see chart.
Corporate narrow money numbers are volatile and the April weakness may prove temporary. It may, however, indicate that firms are reining back expansion plans, perhaps because of EU referendum uncertainty. Corporate money sometimes leads household / aggregate trends, e.g. before the 2008-09 recession. Household M1 buoyancy suggests solid consumer spending / GDP growth over the summer / autumn but confirmation of a corporate money slowdown would raise doubts about economic prospects for late 2016 / early 2017.