Recent public borrowing figures cast doubt on the consensus view that the deficit will exceed the Budget forecast of £175 billion in 2009-10. According to the Treasury's September survey of forecasters, the median projection is £184 billion.

The £175 billion official target implies an average of £14.6 billion a month. In the first half of the year, however, a measure of borrowing adjusted for seasonal variation averaged £12.4 billion – see first chart.

To reach the official projection, borrowing would need to rise to £16.8 billion a month in the second half of the year but a three-month moving average has recently stabilised well below this level. The reversal of last December's VAT cut from January should limit further deterioration later in 2009-10.

Money supply figures also released today show a further pick-up in "retail M4", comprising notes and coin in circulation, retail bank deposits and building society deposits – second chart. Inflation-adjusted retail M4 is a leading indicator of retail sales – third chart. The improvement suggests stronger spending into year-end but real money growth is likely to fall back in late 2009 and early 2010 as headline inflation rebounds – see previous post.