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Tighter UK Liquidity

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Tighter UK Liquidity

There has just been a very mixed bag of data releases out of the UK relating mainly to liquidity and credit but also updating mortgage and manufacturing data. The headline manufacturing number is the Markit Economics Manufacturing Purchasing Managers Index (PMI) this has come in at 57.0, although this is down slightly on the 57.3 experienced in April it has exactly matched market expectations. This Manufacturing PMI number is standardized globally and therefore can be compared to the peer readings, the UK is ahead of all the major Eurozone countries and likely also ahead of the US which will publish it’s PMI numbers later in the day.

On the credit and liquidity front there has been a tightening up of the situation in the UK during the month of April. The M4 Money Supply contracted by -0.2% month on month in April, there had been an expectation for a 0.3% expansion but nonetheless today’s reading represents an improvement on the March contraction of -2.3%. The same broad money supply indicator year on year is showing a minor contraction of -0.6% compared to the previous reading of -0.3%.

In line with the tightening of liquidity conditions in the UK in April, there has been a corresponding retraction in credit utilization. The headline Consumer Credit number has fallen to £0.666Bn for the month from over £1.2Bn the previous month, markets had expected a fall but only to around the £0.8Bn level.

Additionally, the Net Lending to Individuals statistic contracted in April, month on month the level is now showing £2.4Bn compared with the March number of £2.9Bn, again the fall has somewhat surprised observers who had been anticipating a smaller drop to approximately £2.7Bn.

Unsurprisingly, based on the above data, the Mortgage Approval figures for the UK are also slightly off for the month of April. The number of mortgages approved was 62.918k, this is lower than the 66.563k approval level in March and also lower than the 64.750k expected by the market.

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