The buoyancy of UK retail spending in the wake of the Brexit vote had been signalled by strong July growth of notes and coin in circulation. Weekly Bank of England data on the note issue suggest that the stock of currency rose solidly again in August, hinting that spending has remained firm.
Annual growth of notes and coin has been trending higher since late 2015, reaching 8.2% in July, the fastest since 2009. Annual growth in the note issue, meanwhile, rose from 8.6% in July to 8.8% in August, according to the weekly Bank of England data – see chart. This suggests that the monthly rise in currency in circulation in August exceeded a 0.6% increase in August 2015. (Notes account for more than 90% of the currency stock.)
In addition to spending resilience, currency demand may have been boosted by further cuts in instant-access deposit rates and fears that banks will start to charge for operating current accounts. As previously discussed, data in the Bank’s Annual Report show that the stock of £50 notes has been growing particularly strongly, possibly indicating rapid expansion of illegal economic activity and / or “hoarding” of such notes.
