Monetary and financial statistics for May released today are encouraging in three respects.
First, the Bank of England's proxy measure for M4 excluding money holdings of financial intermediaries probably grew respectably, following a hefty 1.0% gain in April. The Bank currently has insufficient information to produce a firm estimate but headline M4 rose by 0.2% in May and was again depressed by intra-banking-group transactions – excluded from the proxy measure. Based on available evidence, the proxy may have risen by 0.5% or more last month.
Secondly, M4 lending – excluding the effects of securitisations and loan transfers – bounced back to show 0.9% growth in May after a rare 0.3% decline in April. As with M4, the rise would have been larger but for a decline in intra-group business. At the margin, this should lessen MPC concerns that lending constraints will be a major impediment to an economic recovery. (The Bank's latest Trends in Lending survey, also released today, is gloomy but Lending Panel banks report an ongoing modest recovery in mortgage approvals and a small net rise in corporate loan facilities in May.)
Thirdly, consistent with quantitative easing improving companies' access to non-bank finance, private non-financial firms raised a net £4.1 billion from issues of bonds, shares and commercial paper in May, up from £3.1 billion in April and well above the monthly average of just £400 million over 2003-08 – see chart. Companies have raised a net £13.6 billion in these markets so far in 2009, equivalent to 2.7% of outstanding sterling bank borrowing at the end of 2008.
