Follow the (Divisia) Money
It was very good to see some monetarist analysis in the UK media this week – Ed Conway reported that “Households Raid Savings At Record Rate” for Sky News, and followed this with a blog post. The “raid” is actually a switch from long to short-term deposit accounts, which started mid-2012, as Ed’s graph shows.
Though the traditional broad money aggregates are growing steadily and at “decent” rates (M4ex at 4-5% this year), this shift towards liquidity naturally has a more profound impact on the Divisia indices. I would treat this more as an indicator of current monetary conditions; Duncan Brown has a very nice post earlier this year exploring the relation between UK monetary aggregates and nominal spending in great detail.
Here, anyway, is the current state of the data, showing M4ex, household divisia and nominal spending: