The table below provides further evidence that money leads credit around the trough of the economic cycle.
The table dates the lows in the six-month rates of change of UK M4 and M4 lending around the recession troughs in the mid 1970s, early 1980s and early 1990s. Money bottomed about a year before credit in all three cases.
Six-month M4 growth – on the Bank of England's adjusted measure – appears to have troughed in the fourth quarter of 2008. Based on the historical lead, bank lending could remain weak until late 2009 / early 2010.
Providing recent faster money growth is sustained, an economic recovery can coexist with ongoing lacklustre credit trends. Lending constraints could become an issue as the upswing develops but by that stage banks' balance sheets and risk appetite may have improved significantly.
| Date of trough in six-month growth | M4 | M4 lending | Lag |
| Mid 1970s | Q3 1974 | Q3 1975 | 4Q |
| Early 1980s | Q1 1982 | Q2 1983 | 5Q |
| Early 1990s | Q1 1993 | Q1 1994 | 4Q |
| Current | Q4 2008* | ||
| * M4 excluding intermediate OFCs |