Broad money figures confirm growth trend

BUOYANT bank lending in December provided further confirmation yesterday that economic growth maintained its momentum at the end of last year. But the City remains nervous that April's tax increases will slow the recovery.

The broad measure of money circulating in the economy, M4 - cash plus bank and building society accounts - grew by an unexpectedly large 0.7 per cent in December, adjusted for seasonal changes, taking the year-on-year growth rate from 4.9 to 5.5 per cent.

M4 has grown at an annual rate of 9 per cent in the past three months. Marian Bell, of Royal Bank of Scotland, warned that this might point to 'unacceptably high inflation in 12 to 24 months' time'. The monthly rise in bank and building society lending on the M4 definition was also higher than City forecasts at pounds 4.1bn, up from pounds 600m in the previous month.

The British Bankers' Association also reported that the large banks lent a seasonally adjusted pounds 1.42bn to the private sector last month. This included an pounds 854m rise in lending to manufacturers. The BBA warned that this might reflect borrowing ahead of the Budget.

The Building Societies Association reported fewer net new mortgage commitments than expected. Seasonally adjusted new commitments fell from pounds 3bn to pounds 2.6bn.