We are in a monetary world..

Gone are the days when monthly economic data (stage of cycle, capacity constraints, interest rates, inflation, wage growth etc.) could be relied upon to provide a rough gauge as to the direction of the economy.  We now live in a world dominated by debt dynamics, money supply growth and expansion and or contraction of bank lending.

And so it goes with the recent B of E Trends in Bank lending:

“The annual rate of growth in the stock of lending to UK businesses was negative in the three months to November. The stock of lending to small and medium-sized enterprises continued to contract. The annual rate of growth in the stock of secured lending to  households was little changed…..Conditions in longer-term wholesale funding markets were challenging in 2011 Q4…..higher wholesale bank funding costs were feeding through somewhat to loan pricing on new business for some corporates….had not yet significantly affected mortgage pricing, according to some major UK lenders….Spreads over reference rates on new lending widened for businesses in 2011 Q4…..expected to widen further in the coming quarter.

…..while firms with strong balance sheets generally had access to bank lending, small businesses often reported that lending conditions remained tight. Demand for credit from small and medium-sized enterprises was muted in 2011 Q4……Demand for secured and unsecured lending by households in 2011 Q4 was reported in the Credit Conditions Survey to have fallen.”

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