#europe – Page 3 – Chris Mallin Macro Perspectives

“Still in-synch?”

Are the UK and EA money sectors still sending consistent messages?

The key chart

**Trends in UK and EA broad money** (Source: BOE; ECB, CMMP)

The key message

The messages from the UK and euro area (EA) money sectors were remarkably consistent during the COVID-19 pandemic. Are they still sending consistent messages now?

Growth in broad money rose sharply in both regions during the pandemic, peaking in 1Q21. Growth in narrow money (M1), and overnight deposits with banks within this, was the main driver of broad money growth. UK and EA households (HHs) were increasing savings and delaying consumption – deflationary rather than inflationary forces. Note, in this context, that growth in private sector credit (key assets of banks) did not match the growth in broad money (key ST liabilities of banks). Indeed the gap between money growth and lending growth reached historically high levels in 1Q21. These were atypical money and credit cycles.

Broad money growth has slowed down to pre-pandemic levels now. UK and EA HHs are no longer hoarding cash. The demand for consumer credit has recovered with the largest quarterly flows since the recovery began in 2Q21. Consumer credit demand has returned to pre-pandemic levels in the UK but has still to recover fully in the EA. Growth rates in money supply and private sector credit have also re-aligned as money and credit cycles have re-synched with each other. In the EA, lending growth exceeded money supply growth in June 2022 for the first time since October 2011. The contribution of productive COCO-based lending has also increased in both regions. In the EA, for example, NFC lending grew faster than mortgages in June 2022.

In short, the key signals that I have been following consistently since early 2021 are all sending broadly positive messages for the economic outlook in both the UK and EA. The money sectors are still sending consistent messages, albeit with slightly different areas of emphasis.

The UK is more geared towards a recovery in consumer credit and has benefited from a stronger recovery here. Overall credit growth is slowing in the UK, however. The EA has seen a more promising recovery in lending to NFC and credit growth is still accelerating (in nominal terms).

As highlighted in the previous two posts, rising inflation has overshadowed all of these positive developments in the EA and the UK, however. Credit growth is negative in real terms in both regions, and leading, coincident and lagging monetary indicators are slowing sharply and in a coordinated fashion.

The synchronisation in the messages from the UK and EA money sectors extends to both the good and the bad news. Plenty for optimists and pessimists to debate here…

Still in-synch?

The messages from the UK and euro area (EA) money sectors were remarkably consistent during the COVID-19 pandemic. Are they still sending consistent messages now?

The impact of the COVID-19 pandemic

**The impact of COVID-19 on UK and EA broad money growth** (Source: BoE; ECB; CMMP)

Growth in broad money rose sharply in both regions to peak in 1Q21 (see chart above). In the UK, the YoY growth rate in M4ex rose from 7.5% in March 2020 to a peak of 15.4% in February 2021. In the EA, the growth rate in M3 rose from 7.5% in March 2020 to a peak of 12.5% one month earlier in January 12.5%.

**Narrow money as %age of broad money in the UK and EA** (Source: BoE; ECB; CMMP)

Growth in narrow money (M1), and overnight deposits with banks within this, was the main driver of broad money growth. M1 currently accounts for 69% of UK M3 and 73% of EA M3, up from 48% and 51% respectively a decade earlier. This means that UK and EA households (HHs) were increasing savings and delaying consumption during the pandemic – deflationary rather than inflationary forces.

Put simply, money sitting idly in bank deposits contributes to neither growth nor inflation.

**The gap between UK and EA lending and money supply growth** (Source: BoE; ECB; CMMP)

Note that the growth in broad money (bank’s ST liabilities) was not matched by growth in private sector credit (banks’ assets). Indeed the gap between growth in money and growth in lending reached historic highs in 1Q21. In short, the money and credit cycles had moved out-of-synch with each other, and to a record extent.

The recovery from COVID-19

Broad money growth has slowed down to pre-pandemic levels now (see chart above). In June 2022, growth in M4ex had slowed to 4.4% in the UK and growth in M3 had slowed to 5.7% in the EA. These represent the slowest rates of growth since January 2020 and February 2020 respectively.

**Monthly HH money flows as a multiple of pre-pandemic average flows** (Source: BoE; ECB; CMMP)

HHs are no longer hoarding cash. In the UK, monthly HH money flows fell to £1.5bn in June 2022, 0.3x the average pre-pandemic flow of £4.7bn. In the EA, monthly HH deposit flows fell to €8.5bn, again this is 0.3x the average pre-pandemic flow of €33bn (see chart above).

**Quarterly consumer credit flows** (Source: BoE; ECB; CMMP)

The demand for consumer credit has recovered with the largest quarterly flows since the recovery began in 2Q21. At the peak of the crisis in 2Q20, UK and EA HHs repaid £13.2bn and €12.9bn in consumer credit respectively. More recently, we have seen five consecutive quarters of positive consumer credit flows (see chart above).

Consumer credit demand has returned to pre-pandemic levels in the UK but has still to recover fully in the EA. In the 2Q22, UK consumer credit flows recovered to £4.2bn, above the pre-pandemic average of £3.6bn. EA consumer credit flows also recovered to €7.5bn, but they remain below the pre-pandemic average of €10.8bn.

**Annual growth rates in UK and EA consumer credit** (Source: BoE; ECB; CMMP)

Annual growth rates in consumer credit have also recovered to post-pandemic highs, to 6.5% in the UK and 3.3% in the EA in June 2022. Note the relative gearing of the UK here (see chart above). Consumer credit growth slowed faster and recovered stronger in the UK than in the EA.

**Trends in the gap between UK and EA lending and money supply growth**
(Source: BoE; ECB; CMMP)

Growth rates in money supply and private sector credit have also re-aligned as money and credit cycles have re-synched with each other (see chart above). In the EA, lending growth exceeded money supply growth in June 2022 for the first time since October 2011. In the UK, lending growth still lagged money supply growth by 2.1ppt in June 2022, but this is much narrower than the peak gap of 11.5ppt seen in February 2021.

**Trends in UK and EA bank lending by type** (Source: BoE; ECB; CMMP)

The contribution of productive COCO-based lending has increased in both regions. In the EA, NFC lending grew faster (5.9%) than mortgages (5.3%) in June 2022. Less productive, mortgage lending remains resilient in the EA, but its growth is slowing in the UK (see chart above).

Conclusion

In short, the key signals that I have been following consistently since early 2021 are all sending broadly positive messages for the economic outlook in both the UK and EA. The UK has benefited from a stronger recovery in consumer credit. The EA has seen a more promising recovery in lending to NFC.

As highlighted in the previous two posts, rising inflation has overshadowed all of these positive developments, however (see “Accounting for inflation” and “Accounting for inflation – part 2”). Credit growth is negative in real terms in both the UK and EA, and leading, coincident and lagging monetary indicators are slowing sharply and in a coordinated fashion.

The synchronisation in the messages from the UK and EA money sectors extends to both the good and the bad news. Plenty for optimists and pessimists to debate here…

Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.

“Euro area re-synching – part 2”

The implications for asset allocation

The key chart

**The sharp and co-ordinated slowdown in EA money and private sector credit (% YoY, real)**
(Source: ECB; CMMP)

The key message

What are the implications of the re-synching of euro area money and credit cycles for asset allocation and what are the current messages from the money sector telling us?

Growth rates in narrow money (M1) and loans to the private sector display relatively robust relationships with the business cycle over time. M1, household (HH) and corporate (NFC) credit also enjoy leading, coincident and lagging relationships with GDP respectively and can be very useful inputs into asset allocation processes, therefore.

The recovery in money and credit cycles in the post-GFC period broadly followed this stylised pattern. Other macro-factors complicated the wider interpretation of these trends, however. Interest rate effects (initially) and the COVID-19 pandemic (more recently) had a more important impact on narrow money growth than cyclical factors, for example. At the same time, extended periods of private sector deleveraging resulted in HH and NFC credit growth lagging GDP growth for much of the past decade.

That said, the overall message has been clear – while money growth has exceeded GDP growth over the past decade, credit growth has lagged it. The consequences for macro policy choices of this extended dynamic was clear, even before the pandemic hit.

With money and credit cycles re-synching now, inflation is the key challenge in interpreting current messages from the money sector.

Optimists might note that the slowdown in monetary growth reflects a sharp moderation in deflationary money flows into overnight deposits, and will be encouraged by the resilient HH and recovering NFC credit demand (in nominal terms).

In contrast, pessimists might prefer the more traditional approach described above. For them, the very sharp and co-ordinated slowdown in money and credit growth in real terms with be a far more alarming message, especially for those positioned for economic recovery.

Euro area re-synching – part 2

As a macro strategist, economist and global investor, I have always been interested in the relationship between money, credit and business cycles and the implications for asset allocation.

**The recovery in money and credit followed the stylised pattern post-GFC (% YoY, real)**
(Source: ECB; CMMP)

The recovery in money and credit cycles followed this stylised pattern in the post-GFC period (see chart above). Real M1 bottomed in July 2011 (-1.4%) and turned positive in May 2012. Real HH credit bottomed next in September in 2012 (-2.3%) and turned positive in December 2014. Finally, real NFC credit bottomed in June 2013 (-4.6%) and turned positive in November 2015. Other macro-factors complicated the wider interpretation of these trends, however.

**Trends (% YoY) in real GDP and real M1** (Source: ECB; CMMP)

Interest rate effects (initially) and the COVID-19 pandemic (more recently) had a more important impact on narrow money growth than cyclical factors, for example (see chart above).

Interest rate and cyclical effects are typically the main factors affecting trends in narrow money, with the latter being more relevant for asset allocation purposes.

While real M1 continued to exhibit leading indicator qualities, strong demand for overnight deposits (within M1), driven by their increasing low opportunity cost, suggest that interest rate effects had a greater impact than cyclical factors over much of the past decade. The COVID-19 pandemic also resulted in dramatic increases in forced and precautionary savings, again largely in the form of overnight deposits. This compounded the challenges of interpreting these dynamics (see “Don’t confuse the message”).

**Trends (% YoY) in real GDP and real HH credit** (Source: ECB; CMMP)

At the same time, extended periods of private sector deleveraging resulted in HH and NFC credit growth lagging GDP growth for much of the past decade.

The chart above illustrates how real HH credit has enjoyed a broadly coincident relationship with GDP for most of the period. That said, it also shows that the EA HH sector was engaged in an extended period of passive deleveraging between March 2010 and March 2019 with real growth in HH credit lagging real growth in GDP.

Similarly, the chart below illustrates how NFC credit has also enjoyed a broadly lagging relationship with real GDP growth. Again, the analysis and interpretation is challenged by an extended period of NFC deleveraging. Growth in NFC credit lagged behind real GDP growth from December 2009 to May 2016 and to July 2018, in a more sustained fashion.

**Trends (% YoY) in real GDP and real NFC credit** (Source: ECB; CMMP)

**Monthly HH deposit flows as a multiple of pre-pandemic levels** (Source: ECB; CMMP)

With money and credit cycles re-synching now, inflation is the key challenge in interpreting current messages from the money sector. Optimists might note that the slowdown in monetary growth reflects a sharp moderation in deflationary money flows into overnight deposits (see chart above), and will be encouraged by the resilient HH and recovering NFC credit demand, in nominal terms (see chart below).

**Growth trends (% YoY, nominal) in HH and NFC credit** (Source: ECB; CMMP)

In contrast, pessimists might prefer the more traditional approach described above. For them, the very sharp and co-ordinated slowdown in money and credit growth in real terms (see chart below) will be a far more alarming message, especially for those positioned for economic recovery.

**The alarming and coordinate slowdown in real money and credit growth** (Source: ECB; CMMP)

Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.

“Euro area re-synching – part 1”

EA money and credit cycles are re-synching

The key chart

**YoY growth rates in M3 and private sector credit and trends in excess liquidity**
(Source: ECB; CMMP)

The key message

Growth rates in euro area (EA) money supply and private sector credit continue to converge and re-align. This matters because the de-synchronisation of money and credit cycles over the past decade, which peaked during the COVID-19 pandemic, created major challenges for policy makers, banks and investors alike.

On a positive note, this reflects a combination of slowing (excess) money supply growth and rising demand for private sector credit. Recall that narrow money (M1), and within that overnight deposits, drove the expansion of broad money (M3) during the pandemic. The contribution of productive COCO-based lending is also increasing, led by a recovery in corporate credit. Importantly, COCO-based lending supports both production AND income formation.

That said, less-productive FIRE-based lending continues to be the more important driver of private sector credit in the EA, driven by resilient mortgage demand. FIRE-based lending, which accounts for more than half of the outstanding stock of credit, supports capital gains through higher asset prices but does not lead directly to income generation. This has negative implications for leverage, future growth, financial stability and income inequality.

In short, the message from the money sector here is broadly positive, albeit with the “hidden-risks” that are associated with higher levels of FIRE-based lending. In the second part of this analysis, I analyse money and credit trends in real terms to consider the implications here for the outlook for growth and business-cycle approaches to asset allocation. The conclusions here are less positive…

Euro area re-synching – part 1

Growth rates in EA money supply and private sector credit continue to converge and re-align (see key chart above). This matters because the de-synchronisation of these cycles over the past decade, which peaked during the COVID-19 pandemic, created major challenges for policy makers, banks and investors alike. The effectiveness of monetary policy, the dominant macro policy during this period, diminished dramatically as a result, and banks and investors had to deal with the consequences of excess liquidity for balance sheet management and the (mis-)pricing of both real and financial assets.

**What is driving the re-synching of money and credit cycles?** (Source: ECB; CMMP)

On a positive note, this reflects a combination of slowing (excess) money supply growth and rising demand for private sector credit (see chart above). Broad money (M3) growth has slowed from its January 2021 peak of 12.5% YoY to 6.0% YoY in April 2022. Growth in private sector credit has recovered from its May 2921 low of 2.7% YoY to 5.3% YoY, the highest nominal rate of growth since May 2020. The gap between the two growth rates (the green line in the chart above) has narrowed from 8ppt in January 2021 to 0.7ppt in April 2022, the narrowest gap since November 2018.

**Contribution (ppt) of COCO-based lending to total private sector credit** (Source: ECB; CMMP)

The contribution of productive COCO-based lending is also increasing (see chart above), led by a recovery in corporate credit. COCO-based lending, which includes lending to corporates (NFCs) and household (HH) consumer credit, contributed 1.9ppt towards to total PSC growth of 4.9% YoY in April 2022. This compares with only 0.4ppt to the total PSC growth of 3.0% in August 2021.

Note that COCO-based lending supports both production and income formation. Loans to NFCs are used to finance production, which leads to sales revenues, wages paid, profits realised and economic expansions. So while an increase in NFC debt will increase debt in the economy, it also increases the income required to finance it. Consumer debt also supports productive enterprise since it drives demand for goods and services, helping NFCs to generate sales, profits and wages. It differs from NFC debt to the extent that HHs take on an additional liability since the debt does not generate income.

**Contributions (ppt) of FIRE-based and COCO-based lending to total private sector credit**
(Source: ECB; CMMP)

That said, less-productive FIRE-based lending continues to be the more important driver of private sector credit (see chart above), driven by resilient mortgage demand (see also chart below).

**What’s driving private sector credit demand?** (Source: ECB; CMMP)

FIRE-based lending, which accounts for more than half of the outstanding stock of credit, supports capital gains through higher asset prices but does not lead directly to income generation. Loans to NBFIs are used primarily to finance transactions in financial assets rather than to produce, sell or buy actual output. Such credit may lead to an increase in the price of financial assets but does not lead (directly) to income generation. Mortgage or real estate lending is used to finance transactions in pre-existing assets. It typically generates asset gains as opposed to income (at least directly). As noted in previous posts, the shift towards FIRE-based lending has negative implications for leverage, future growth, financial stability and income inequality.

In short, the message from the money sector here is broadly positive, albeit with the “hidden-risks” that are associated with higher levels of FIRE-based lending.

**YoY real growth trends in M1, household and corporate credit** (Source: ECB; CMMP)

In the second part of this analysis, I analyse money and credit trends in real terms to consider the implications here for the outlook for growth and business-cycle approaches to asset allocation. The conclusions here are less positive…

Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.

“Sonnez l’alarme – II”

Plus ça change…

The key chart

**Trends in net lending/net borrowing, EURbn, rolling 4Q sum** (Source: ECB)

The key message

Comments made by the Governor of the Banque de France in Paris last week (1) confirm that conventional macro thinking continues to (largely) ignore private debt while seeing public debt as a problem, and (2) suggests that reports of the death of out-dated fiscal rules in the euro area (EA) are premature.

What did he say? The Governor rejected arguments that (1) accommodative monetary policy was responsible for the rise in public debt, and (2) that “because of this high public debt, monetary policy is now unable to raise interest rates sufficiently to combat inflation”. He stressed that central bank independence was “notably designed to prevent any risk of fiscal domination.” The rest of the speech focused on why debt must remain a key issue and the future EA fiscal rules.

From a CMMP analysis perspective, there were three extraordinary features of the speech:

First, in discussing the exceptional (fiscal) response to exceptional circumstances, the Governor ignored the similarly exceptional disinvestment by the French private sector;
Second, and linked to this, he suggested that France “could keep the 3% deficit target, which is as a “useful anchor” and even the 60% debt target”;
Finally, he chose not to refer to the elevated risks associated with the level, growth or affordability of risks associated with French private sector debt, particularly in the corporate (NFC) sector..

Why does this matter? The Governor’s speech follows similar arguments presented earlier this year by the French state auditor. In both cases, the level of public sector debt was viewed as a problem but private sector debt was ignored, confirming a fundamental flaw in conventional macro thinking. The support for out-dated and arbitrarily determined fiscal rules also means that the risks of deficit reductions compounding further private sector deleveraging in the future remain.

Plus ça change, plus c’est la même chose…

Sonnez l’alarme II – the charts that matter

**Trends in French public sector net borrowing (EURbn) since 1999** (Source: ECB)

**Trends in French and German government debt ratios (% GDP) versus fiscal target** (Source: BIS)

**Trends in French private sector net lending (EURbn) since 1999** (Source: ECB)

**The view from a sector balances perspective** (Source: ECB)

**Breakdown (% total) of French credit to the non-financial sector** (Source: BIS)

**Rolling 3-year CAGR in NFC credit versus 3-year CAGR in nominal GDP** (Source: BIS)

**French NFC sector debt ratio versus BIS maximim threshold limit** (Source: BIS)

**French NFC debt service ratio versus LT average since 1999** (Source: BIS)

**EA private and public sector balances,** EURbn (Source: ECB)

Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.

“A desynchronised decade”

Created challenges for policy makers, banks and investors alike

The key chart

**Lending growth (% YoY) minus money growth for the UK and EA since 2012** (Source: BoE; ECB)

The key message

Money and credit cycles have been desynchronised for much of the past decade, creating major challenges for policy makers, banks and investors alike.

Growth in money supply has also exceeded growth in private sector credit in the euro area and for much of the period in the UK. The effectiveness of monetary policy, the dominant macro policy, has diminished dramatically as a result.

The gap between growth in money supply and private sector credit hit a historic high during the COVID-19 pandemic. More recently, however, these growth rates have converged as the build-up of excess savings has slowed and the demand for credit has recovered (at least in nominal terms).

This means that three key signals from the UK and EA money sectors have turned more positive: monthly HH money flows have fallen back below pre-pandemic levels; quarterly consumer credit flows have been positive since 2Q21 and have returned to pre-pandemic levels in the UK; and the gap between money supply and private sector credit growth has narrowed.

Macro challenges remain, but the message from the UK and EA money sectors is less bearish than consensus investment narratives.

A desynchronised decade

**Growth rates (% YoY) in EA money and lending** (Source: ECB)

**Growth rates (% YoY) in UK money and lending** (Source: BoE)

Money and credit cycles have been desynchronised for much of the past decade. In typical cycles, monetary aggregates and their key counterparties, such as private sector credit, move together. Put simply, money supply indicates how much money is available for use by the private sector. Private sector credit indicates how much the private sector is borrowing. However, the two charts above show the extent to which, and the periods when, UK and EA money and credit cycles have diverged since March 2012.

**EA money flow minus credit flow (rolling quarters) since Mar 2012** (Source: ECB)

Growth in money supply has also exceeded growth in private sector credit in the euro area and for much of the period in the UK. The charts above (EA) and below (UK) illustrate trends in the gap between money and credit flows (rolling quarters) for both regions. The build-up of liquidity in both regions is clear to see. Increases in the supply of money have not been matched by equivalent increases in private sector demand for credit.

**UK money flow minus credit flow (rolling quarters) since Mar 2012** (Source: BoE)

The effectiveness of monetary policy, the dominant macro policy, has diminished dramatically as a result. Broadly speaking, monetary policy is effective if “central bank accommodation increase money and credit for the private sector to use” (Koo, 2015). Not only has credit growth lagged money supply growth, it has also been predominantly the “wrong type of credit” ie, less productive FIRE-based lending. As noted in previous posts, this has hidden risks in terms of leverage, future growth, financial stability and income inequality.

**Loan growth (% YoY) minus money growth** (Source: BoE; ECB)

The gaps between growth in money supply and private sector credit hit historic highs during the COVID-19 pandemic (see chart above). In the UK, loan growth exceeded money growth between August 2018 and December 2019. During the pandemic, however, the gap between money growth (15.4%) and credit growth (3.9%) widened to 11.5ppt in February 2021. In the EA, money growth (4.9%) exceeded credit growth (3.7%) by 1.2ppt at the end of 2019. The gap peaked at 8ppt in January 2021 – money growth of 12.5% versus credit growth of 4.5%.

**More recent YoY growth trends in UK and EA money and lending** (Source: BoE; ECB)

More recently, these growth rates have converged as the build-up of excess savings has slowed and credit demand has recovered (at least in nominal terms). At the end of 1Q22, money growth had slowed to 5.5% YoY in the UK while credit growth had risen to 3.7% YoY, a narrowing of the gap to only 1.8ppt. Similarly, in the EA, money growth at the end of 1Q22 had slowed to 6.3% YoY while credit growth was 4.7% YoY, a gap of 1.6ppt (see chart above).

Conclusion

What does this mean? Three key signals from the UK and EA money sectors have turned more positive: monthly HH money flows have fallen back below pre-pandemic levels; quarterly consumer credit flows have been positive since 2Q21 and have returned to pre-pandemic levels in the UK; and the gap between money supply and private sector credit growth has narrowed.

Macro challenges remain, but the message from the UK and EA money sectors is less bearish than consensus investment narratives.

Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.

“If confidence is collapsing – part 2”

We might expect HHs to repay consumer credit again

The key chart

**Quarterly flows in UK (£bn) and EA (EURbn) consumer credit** (Source: BoE, ECB)

The key message

If confidence is collapsing, we might reasonably expect households to be repaying consumer credit again. Are they…?

During the COVID-19 pandemic, households (HHs) in the UK and the euro area (EA) repaid consumer credit in four of the five quarters between 1Q20 and 1Q21 (see key chart above). The message from the money sector over this period was that HHs were increasing savings and delaying consumption.

Quarterly consumer credit flows have been positive since 2Q21, however, and have returned to pre-pandemic levels in the UK in 1Q22. Year-on-year growth rates have also recovered to their highest levels since February 2020 and March 2020 in the UK and the EA respectively. Before we get too excited, it is important to note that growth in consumer credit is negative in real terms (and EA HHs repaid €0.4bn of consumer credit in March 2022). So-called “faster indicators” also indicate that HHs in the UK are still delaying their spending on “delayable” good such as clothing and furniture indicating that the sustainability of consumption remains unproven still.

In short, the trends in two of the three key signals from the money sector remain positive, (if not that exciting). HHs in the UK and the EA have stopped hoarding cash and demand for consumer credit has remained positive. The recovery in the UK appears more advanced than in the EA, although current UK spending is concentrated towards work-related and staple items rather than delayable items.

The key message here is that while HH consumption patterns remain relatively subdued they are inconsistent with more extreme investment narratives.

Messages from the money sector were less optimistic than consensus investment narratives in 2H21 and less pessimistic than the current investment narrative now.

A positive for a macro-strategist currently “long cash”?

If confidence is collapsing – part 2

If confidence is collapsing, we might reasonably expect HH to be repaying consumer credit again. During the COVID-19 pandemic, HHs in the UK and the EA repaid consumer credit in four of the five quarters between 1Q20 and 1Q21 (see key chart above). Between 1Q18 and 4Q19, quarterly consumer credit flows averaged £3.6bn and €10.3bn in the UK and EA respectively. At the height of the pandemic (2Q20), UK and EA households repaid £13.2bn and €12.9bn respectively. The message from the money sector over this period was that HHs were increasing savings and delaying consumption.

Quarterly consumer credit flows have been positive since 2Q21, however, and have returned to pre-pandemic levels in the UK in 1Q22 (see chart above). UK consumer credit flows totalled £3.6bn in 1Q22, up from £3.3bn in 4Q21 and exactly in line with the average pre-pandemic quarterly flows. EA consumer credit flows totalled €4.4bn, down from €6.5bn in 4Q21. In contrast to the UK, current EA flows remain well below the pre-pandemic average flows of €10.3bn and EA HHs repaid €0.4bn of consumer credit in March 2022. Recall that in lesson #5 in “Seven lessons from the money sector in 2020”, I argued that,

“the UK is likely to demonstrate a higher gearing to a return to normality than the EA.”

**YoY growth rates in consumer credit in the UK and EA** (Source: BoE; ECB)

Year-on-year growth rates have also recovered to their highest levels since February 2020 and March 2020 in the UK and the EA respectively. In March 2022, UK and EA consumer credit grew 5.2% YoY and 2.5% YoY respectively (see chart above). Note again the relatively high gearing of the UK to a recovery in consumer credit demand. Before we get too excited, however, it is important to note that YoY growth in consumer credit is negative in real terms in both regions.

**Credit and debit card payments on durable goods compared with pre-pandemic levels**
(Source: ONS)

So-called “faster indicators” also indicate that HHs in the UK are still delaying their spending on “delayable” good such as clothing and furniture indicating that the sustainability of consumption remains unproven still. According to the latest ONS data, credit and debit card spending remains 12% below its pre-pandemic level and 51% below its 2021 high (see graph above). This makes delayable spending the weakest segment in current UK spending (see graph below). Overall card spending is just above pre-pandemic highs, reflecting relatively strong “work-related” and “staples” spending. The latter two segments are 24% and 13% above pre-pandemic levels respectively.

**Credit and debit card spending versus pre-pandemic levels broken down by type** (Source: ONS)

Conclusion

The key message here is that while HH consumption patterns remain relatively subdued they are inconsistent with the more extreme investment narratives that have gained popularity recently. Messages from the money sector were less optimistic than consensus investment narratives in 2H21 and less pessimistic than the current investment narrative now. A positive for a macro-strategist currently “long cash”?

Please note that the summary comments and charts above are extracts from more detailed research that is available separately.

“If confidence is collapsing – part 1”

Why have HH money flows fallen back below pre-pandemic levels?

The key chart

**Monthly HH deposit flows as a multiple of average pre-pandemic levels.** (Source: BoE; ECB)

The key message

If confidence is collapsing, why have household (HH) money flows in the UK and the euro area (EA) fallen back below pre-pandemic levels?

During the COVID-19 pandemic, HHs increased their holdings of liquid assets such as overnight deposits, despite earning negative real returns on those assets. In other words, the expansion of broad money over the period was a reflection of deflationary rather than inflationary forces, challenging the monetarist explanation for the current rise in inflation.

In both the UK and EA, monthly HH money flows have fallen back below pre-pandemic levels during 1Q22. These trends support the argument that forced savings, rather than precautionary savings, were the main driver of the spike in HH savings during the pandemic. This is important because forced savings can be released relatively quickly to support economic activity. Nonetheless, it would also be reasonable to assume that the level of precautionary savings would still be above pre-pandemic levels given the uncertainties caused by the Ukraine war, rising inflation and cost-of-living pressures. So far, at least, this does not seem to be the case…

…is the consensus narrative in relation to consumer confidence becoming too bearish?

If confidence is collapsing

If confidence is collapsing, why have household (HH) money flows in the UK and the euro area (EA) fallen back below pre-pandemic levels? Recall that these flows offer important insights into HH behaviour and were one of three key signals that CMMP analysis focused on throughout 2021 in order to interpret macro trends more effectively. The other signals were trends in consumer credit demand (growth outlook) and the synchronisation of money and credit cycles (policy context). I will turn to these signals in subsequent posts.

During the COVID-19 pandemic, HHs increased their holdings of liquid assets such as overnight deposits despite earning negative real returns (see key chart above). In the UK, monthly money flows peaked at £27bn in May 2020 and again at £21bn in December 2020, 5.8x and 4.5x average pre-pandemic levels of £4.6bn respectively. In the EA, monthly HH deposit flows peaked at €78bn in April 2020, 2.4x the average pre-pandemic level.

**Narrow money (M1) as a %age of broad money (M3)** (Source: BoE; ECB)

This meant that the expansion of broad money over the period was a reflection of deflationary rather than inflationary forces. Narrow money (M1), which comprises notes and coins in circulation and overnight deposits, has been increasingly important component/driver of broad money. In March 2022, M1 represented 68% and 73% of M3 in the UK and EA respectively (see chart above). This compares with respective shares of only 46% and 49% in March 2009. This matters for the simple reason that it challenges the monetarist explanation of rising inflation.

Money sitting idly in overnight deposits with banks contributes to neither growth nor inflation.

**UK monthly HH money flows (£bn) and multiple of pre-pandemic level (x)** (Source: BoE)

In both the UK and EA, monthly HH money flows have fallen back below pre-pandemic levels during 1Q22. In the UK, monthly flows in February and March 2022 were £4.1bn and £4.6bn respectively (see chart above). These compare with the average pre-pandemic flow of £4.7bn. In the EA, March 2022’s monthly flow of €16bn, was half the average pre-pandemic flow of €33bn (see chart below).

**EA monthly HH money flows (EURObn) and multiple of pre-pandemic level (x)** (Source: BoE)

These trends support the argument that forced savings, rather than precautionary savings, were the main driver of the spike in HH savings during the pandemic. This is important because forced savings can be released relatively quickly to support economic activity. Nonetheless, it would also be reasonable to assume that the level of precautionary savings would still be above pre-pandemic levels given the uncertainties caused by the Ukraine war, rising inflation and cost-of-living pressures.

So far, at least, this does not seem to be the case…is the consensus narrative too bearish?

Please note that the summary comments above are extracts from more detailed analysis that is available separately.

“Sonnez l’alarme?”

Where are the “real risks” in French debt dynamics?

The key chart

**Trends in French debt ($bn) broken down by sector** (Source: BIS; CMMP)

The key message

France’s state auditor, the Cour des Comptes, “sounded the alarm” about the impact of pandemic spending on France’s widening budget deficit and rising government debt levels last week. The auditor also raised concerns about potential risks to the cohesion of the EA. Are these concerns justified or do greater risks lie elsewhere within French debt dynamics?

The auditor is correct to highlight the impact of pandemic spending on the government’s net borrowing. This rose from 78bn in 3Q19 to €220bn in 3Q21. The level of government debt and the debt ratio are close to their record 1Q21 highs. The debt ratio has remained above the EA’s 60% GDP threshold for the past two decades and the divergence in the debt ratios of France and Germany in the post-GFC period represents a “potential risk to the cohesion of the EA”.

The first counter argument, based on national accounting principles, is that the correct level of government net borrowing is the one that balances the economy not the budget. The level of private sector net lending rose from €75bn in 3Q19 to €225bn in 3Q21, driven largely by HH net savings of €134bn. In other words, the net borrowing of the government was a necessary, timely and appropriate response to the scale of the private sector’s net lending/disinvestment.

The second counter argument is that that while the outstanding stock of French government debt may be the fourth highest in the world, France ranks lower in terms of government indebtedness. This argument will be more compelling to those who view debt sustainability (correctly) as a flow concept, but much less compelling to those who prefer the traditional stock-based approach.

From a risk and financial stability perspective, we are more concerned about France’s private sector debt dynamics, particularly in the NFC sector. France has relatively high exposure to the NFC sector, the fifth most indebted NFC sector globally. In spite of this, France has seen the third highest rate of excess NFC credit growth globally over the past three years. Affordability risks in the NFC sector are also elevated in absolute terms and in relation to historic trends. While the level of HH indebtedness in France is low in absolute terms, the risks associated with excess HH credit growth and affordability are elevated in this sector too.

The headlines resulting from the Cour des Comptes’ report support our wider hypothesis that conventional macro thinking is flawed to the extent that it typically ignores private debt while seeing government debt as a problem rather than as a solution.

Sonnez l’alarme?

France’s state auditor, the Cour des Comptes, “sounded the alarm” about the impact of pandemic spending on the widening budget deficit and level of government debt in its 2022 Annual Report published on 16 February 2022. The auditor also argued that the government should revise its deficit reduction plans after April’s presidential election, claiming that current plans risk fuelling divergences within the euro area, especially with more fiscally conservative countries such as Germany.

The supporting evidence

**Trend in government net borrowing over the past twenty years** (Source: ECB; CMMP)

The state auditor is correct to highlight the impact of pandemic spending on the budget deficit. As illustrated in the chart above, the government’s net borrowing rose from €78bn in 3Q19 to €220bn in 3Q21. The current level of net borrowing is also higher than the previous peak net borrowing of €143bn in the aftermath of the GFC. Viewed in isolation, this is a scary chart!

**Trends in government debt and debt ratios over the past twenty years** (Source: BIS; CMMP)

The level of government debt and the debt ratio are also close to their all-time highs (see chart above). The outstanding stock of government debt rose form €2,727bn in 2Q19 to €3,088bn in 2Q21, slightly below the peak 1Q21 level of €3,099bn. The government debt ratio (the blue line above) rose from 113% GDP in 2Q19 to 128% GDP in 2Q21. Again, the debt ratio also peaked at 134% GDP in 1Q21. Note that throughout the past two decades, France’s government debt ratio has exceeded the EA’s threshold of 60% GDP.

**Trends in French and German government debt ratios** (Source: BIS; CMMP)

The debt ratios of France and Germany have been on different trajectories for most of the post-GFC period. The German government debt ratio peaked at 86% GDP in 4Q12 and declined to a recent low of 64% GDP in 4Q19 (still above the EA’s threshold level). So again, the auditor is correct to highlight this as a “potential” source of risk to the cohesion of the EA.

The counter arguments

The first counter argument here is a simple one – the correct level of government net borrowing is the one that balances the economy not the budget. It is a basic principle of national accounting that the net borrowing of one economic sector (in this case the French government), must be equal to net lending of one or other economic sector(s) (see “Everyone has one”).

**Private sector net lending versus public sector net borrowing** (Source: ECB; CMMP)

The chart above plots the net lending of the private sector and the net borrowing of the public sector together. The level of private sector net lending, or disinvestment (the blue area), rose from €75bn in 3Q19 to €225bn in 3Q21, driven largely by HH net savings of €134bn and FI net savings of €125bn.

In other words, the increase in the government’s net borrowing position essentially matched the increase in the private sector’s net lending position. Rather than a source of alarm, the spending response of the French government was necessary, timely and appropriate.

The second counter-argument is that while, the outstanding stock of French government debt may be the fourth highest in the world, France is ranked lower in terms of government indebtedness (with a debt ratio similar to the UK).

**Top 10 BIS reporting economies ranked by total government debt (EURbn)** (Source: BIS; CMMP)

The chart above ranks the top ten BIS reporting countries in terms of outstanding government debt. Total government debt was $3,670bn at the end of 2Q21, representing a 4% share of global government debt after the US (33%), Japan (14%) and the UK (5%). The chart below ranks the top ten BIS reporting countries in terms of the government debt ratio. In this case, France’s ranking drops to #8 globally and #7 in Europe after Greece, Italy, Portugal, Spain, Belgium and the UK.

**Top 10 BIS reporting economies ranked by government debt ratio (% GDP)** (Source: BIS; CMMP)

This second counter-argument will be less persuasive for those who view debt sustainability as a stock concept (the traditional approach). They will point to the fact that France’s government debt ratio is not only above the EA average, but it is also above the (largely arbitrarily chosen) 60% or 90% thresholds. CMMP analysis, which is centred on the sector balances framework, considers both fiscal space and debt sustainability as flow concepts and for reasons mentioned above (and possibly in future posts) is less concerned here.

What about private sector debt dynamics?

From a risk and financial stability perspective, we are more concerned about France’s private sector debt dynamics, particularly in the NFC sector.

**Trends in the breakdown of French and EA debt** (Source: BIS; CMMP)

France has a relatively high exposure to NFC debt. At the end of 2Q21, NFC debt accounted for 46% of total debt. This is down from 50% at the time of the GFC (see chart above) but remains above the aggregate shares of 32% and 39% for advanced and EA economies respectively. Why does this matter?

**Top 10 BIS reporting economies ranked by NFC debt ratio (% GDP)** (Source: BIS; CMMP)

France’s NFC sector is the fifth most indebted NFC sector among BIS economies. At the end of 2Q21, the NFC debt ratio was 170% GDP, after Luxembourg (322%), Hong Kong (304%), Sweden (179%) and Ireland (171%). The French NFC debt ratio is well above the 111% GDP and 98% GDP aggregate for all advanced and EA economies respectively and the 90% threshold level above which the BIS considers debt to be a drag on future growth.

**Excess NFC credit growth plotted against NFC debt ratios** (Source: BIS; CMMP)

In spite of the high level of NFC indebtedness, France has seen the third highest levels of excess NFC credit growth over the past three years (see chart above). The NFC sector’s RGF was 4.8% in 2Q21, after Switzerland (6.7%) and Japan (6.6%). The rate of excess NFC credit growth was well above the EA average of 1.8% and higher than the 3.0% average for all advanced economies. Risks are clearly elevated when excess rates of credit growth combine with high levels of indebtedness, as is the case here (for an explanation of the RGF framework see here.)

**Trends in NFC debt service ratio** (Source: BIS; CMMP)

The NFC debt service ratio (DSR) is also high in absolute terms and above its respective LT average despite the low absolute cost of NFC borrowing. As at the end of 2Q21, the DSR was 60%, 9ppt above its LT average of 51% (see chart above). France is one of four advanced economies where the DSRs are high in both absolute terms and in relation to LT averages, along with Sweden, Canada, and Norway (see chart below).

**NFC debt service ratios and deviations from LT averages** (Source: BIS; CMMP)

While the level of HH indebtedness in France is low in absolute and relative terms, the risks associated with excess HH credit growth and affordability are elevated in this sector too. At the end of 2Q21, the HH debt ratio was 67% GDP, slightly below the 4Q20 peak level of 68%. The HH debt ratio is higher than the 61% EA average but below the 77% advanced average and the BIS threshold level of 85% GDP. Nonetheless, France has the seen the highest rate of excess HH credit growth over the past three years among EA and other advanced economies. The HH’s debt service ratio, while low in absolute terms, is also above its LT average (see “Global debt dynamics – IV” for more details and charts).

Conclusion

The COVID-19 pandemic had a significant impact on the French government’s net borrowing and the level of government debt. The widening gap between France’s government debt ratio and those of the so-called “fiscally-conservative” economies is also a potential source of conflict with the EA. Viewed from a sector balances perspective, however, the government’s response was timely, necessary and appropriate. We are also more concerned about the risks associated with private sector debt dynamics, particularly in the highly indebted NFC sector.

More fundamentally, the headlines resulting from the Cour des Comptes’ report support our wider hypothesis that conventional macro thinking is flawed to the extent that it typically ignores private debt while seeing government debt as a problem rather than as a solution.

Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.

“Slow and steady as she goes”

HH behaviour is normalising but policy challenges remain in the euro area

The key chart

**Monetary developments in the euro area since 1999** (Source: ECB; CMMP)

The key message

Broad money growth in the euro area (EA) slowed to 6.9% in December 2021, the slowest rate of growth since February 2020. What is the main driver here and what are the messages for household behaviour, growth, macro policy and the productiveness of lending?

Narrow money (9.8% YoY) continues to be the main driver of broad money growth, contributing 7ppt to the overall 6.9% growth. Overnight deposits (10.1% YoY) contributed 6.2ppt alone. Note (again) that money sitting idly in overnight deposits contributes to neither growth nor inflation. Explanations for rising inflation lie elsewhere.

The on-going moderation in monthly household (HH) deposit flows indicates reduced uncertainty and a normalisation of behaviour. While these flows rose from €17bn in November 2021 to €23bn in December 2021, they remain below the pre-pandemic average of €33bn.

HHs repaid €3.3bn in consumer credit in December 2021, the first net repayments since April 2021. That said, positive quarterly flows of consumer credit of €2bn, €4bn and €b4bn in 2Q21, 3Q21 and 4Q21 respectively also point to a steady normalisation in HH behaviour.

Money and credit cycles remain out-of-synch with each other, presenting an on-going challenge to policy makers. The degree of de-synchronisation reached its narrowest level since March 2020, however, an indication that the build-up of excess liquidity in the EA is slowing.

The additional challenge for policy makers is that less productive FIRE-based lending continues to be the main driver of PSC. This re-enforces the need for macroprudential polices to address rising financial stability risks in the residential real estate (RRE) sector.

In short, the message from the money sector at the end of 2021 and the start of 2022 is mixed. HH behaviour is normalising with deposit flows moderating and demand for consumer credit recovering. Against this, policy makers face the dual challenge of de-synchronised money and credit cycles and excess growth in less-productive FIRE-based lending. Four key signals to watch in 2022…

Slow and steady as she goes

**Long-term trends in EA broad money (% YoY)** (Source: ECB; CMMP)

Broad money (M3) growth in the euro area (EA) slowed from 7.4% YoY in November 2021 to 6.9% YoY in December 2022, the slowest rate of growth since February 2021 (see chart above). This post examines the current drivers of broad money growth and the implications for household behaviour, growth, macro policy and the productivity of lending in the EA.

**Twenty year trends in M3 (% YoY) and contribution (ppt) from M1** (Source: ECB; CMMP)

Narrow money (M1) continues to be the key driver of broad money growth in the EA. M1 grew 9.8% YoY in December 2021 and contributed 7.0ppt to the overall 6.9% growth in broad money alone (see chart above). Within M1, overnight deposits grew 10.1% YoY and contributed 6.2ppt to M3 growth while currency in circulation grew 7.7% YoY and contributed 0.7ppt to M3 growth.

The key point here is that growth in overnight deposits has been the main driver of broad money growth during the COVID-19 pandemic. This matters because money sitting idly in bank deposits contributes to neither growth nor inflation. The causes of rising inflation lie elsewhere.

**Trends in monthly HH deposits (EURbn) since January 2019** (Source: ECB; CMMP)

The on-going moderation in monthly household (HH) deposit flows indicates reduced uncertainty and a normalisation of HH behaviour. The sharp rise seen during Phase 2 of the pandemic (see chart above) was driven by a combination of forced and precautionary HH savings – that is, money that was not spent. At their peak of €78bn in April 2020, monthly flows were almost 2.5x their pre-pandemic levels.

In December 2021, monthly flows had fallen back to €23bn, up from €17bn in November 2021, but below the pre-pandemic average level of €33bn. Similarly, HH deposit flows for the 4Q21 were €59bn, down from €109bn and €93bn in the 3Q21 and 2Q21 respectively and below the average €99bn quarterly flows recorded during 2019.

**Monthly flows (EUR bn) and growth rates (% YoY) in consumer credit** (Source: ECB; CMMP)

HHs repaid €3.3bn in consumer credit in December 2021. This was the first net repayment since April 2021 (see chart above). That said, quarterly flows of consumer credit €2bn, €4bn and €b4bn in 2Q21, 3Q21 and 4Q21 respectively (see chart below) also point to a normalisation in HH behaviour.

**Quarterly flows (EUR bn) in consumer credit** (Source: ECB; CMMP)

**Trends in money and credit cycles in the euro area** (Source: ECB; CMMP)

Money and credit cycles remain out-of-synch with each other, presenting an on-going challenge to policy makers. The gap between the YoY growth rate of PSC (4.7%) and the YoY growth rate in M3 (6.9%) was -2.8ppt in December 2021 (see chart above). While the degree of de-synchronisation has reached its narrowest level since March 2020, the challenge for policy makers remains since, “monetary policy effectiveness is based on certain stable relationships between monetary aggregates” (Richard Koo, The Holy Grail of Macroeconomics).

**Trends in PSC (% YoY) in nominal and real terms** (Source: ECB; CMMP)

Private sector credit (PSC) grew 3.9% YoY in nominal terms in December 2021 but fell -1.0% YoY in real terms (see chart above). The additional challenge for policy makers is that less productive FIRE-based lending continues to be the main driver of EA credit. FIRE-based lending contributed 2.5ppt to the overall 3.9% YoY growth rate in PSC in December 2022 (see chart below). Mortgages alone contributed 2.1ppt to this, re-enforcing the need for macroprudential polices to address rising financial stability risks in the residential real estate sector.

**Trends in PSC (% YoY) and breakdown (ppt) between FIRE-based and COCO-based lending** (Source: ECB; CMMP)

On a final positive note, the contribution of more productive COCO-based lending to overall PSC growth hit its highest level since March 2021 (see chart below), but all forms of COCO-based lending declined YoY in real terms.

**Trends in PSC (% YoY) and contribution (ppt) of COCO-based lending** (Source: ECB; CMMP)

Conclusion

In conclusion, the message from the money sector at the end of 2021 and the start of 2022 is mixed. HH behaviour is normalising with deposit flows moderating and demand for consumer credit recovering. Against this, policy makers face the dual, on-going challenge of de-synchronised money and credit cycles and excess growth in less-productive FIRE-based lending. Four key signals for 2022…

Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.

“It’s a record – (of sorts)”

But the mix of EA lending is still wrong

The key chart

**Trends in EA COCO-based lending in EURO bn** (Source: ECB; CMMP)

The key message

The outstanding stock of loans that support production and income formation in the euro area (“COCO-based loans”) hit a record high in November 2021 of €5,524bn. Is this cause for celebration? No, not quite…

Remarkably, this new high occurred 155 months after the previous high, recorded back in January 2009 (€5,5517bn). Equally notable/concerning is the fact that the stock of less-productive loans that support capital gains through higher asset prices (“FIRE-based loans”) also hit a new record high of €6,091bn. This was €1,503bn above the corresponding January 2009 level of €4,588bn.

What this means is that nearly all of the aggregate growth in euro area lending since the GFC has been in the form of less-productive lending (that also now accounts for more than half of total outstanding loans). So not only is current lending relatively subdued in volume terms (and negative in real terms) it is also largely the wrong type. FIRE-based lending accounted for 2.7ppt of the total 3.7% growth in private sector lending in November 2021, for example.

Over the past two years, I have been highlighting the associated, “hidden risks” associated with unorthodox monetary policy and the negative implications they have for future growth, leverage, financial stability and income inequality. More recently, I also noted that the ECB has (finally) called for (macroprudential policy) measures to address them with specific reference to “real estate risk” at the end of the year.

It is too early to expect changes in the next few data releases (starting this week on 28 January 2022) but I will be placing added emphasis on the trends in the mix of EA lending during 2022. Three key signals became four…

“It’s a record – (of sorts)”

The outstanding stock of loans that support production and income formation (COCO-based loans) hit a record high of €5,524bn in November 2021. Remarkably, this new high occurred 155 months after the previous high recorded in January 2009 (see chart above).

**Trends in, and breakdown of, EA private sector credit in EUR bn** (Source: ECB; CMMP)

The outstanding stock of loans that support capital gains through higher asset prices (FIRE-based loans) also hit a new high of €6,091bn in November 2021, €1,503bn above the level recorded in January 2009 (see chart above). FIRE-based lending currently accounts for 52% of total euro area lending.

**Trends in YoY growth rates in private sector lending in nominal and real terms** (Source: ECB; CMMP)

Current lending in the euro area is characterised by relatively subdued volumes and the wrong mix when compared to the pre-GFC period. In November 2006, for example (see graph above), lending to the private sector was growing at 11.2% YoY in nominal terms and 9.2% YoY in real terms. Productive, COCO-based lending accounted for 6.2ppt of this growth, while less-productive FIRE-based lending accounted for 5.0ppt.

**Drivers of recent YoY growth rates in EA private sector lending** (Source: ECB; CMMP)

In contrast, according to the latest data point for November 2021, lending to private sector grew only 3.7% YoY in nominal terms but fell -1.1% in real terms. Less-productive lending accounted for 2.7ppt of the total 3.7% growth (see chart above).

**Longer term drivers of EA private sector lending** (Source: ECB; CMMP)

As discussed in previous posts, QE has simply fuelled the shift away from COCO-based lending towards FIRE-based lending in the euro area. This trend has negative implications for future growth, leverage, financial stability and income inequality. Hence, the ECB’s calls in November last year for measures to mitigate risks from FIRE-based lending were welcome. Germany stands out in this context, given the combination of house price dynamics, the extent of house price overvaluation and the lack of specific macroprudential measures to address these risks.

Conclusion

Throughout 2021, CMMP analysis focused on three key signals from the money sector: monthly HH deposit flows (behaviour proxy); trends in consumer credit (growth proxy); and the level of synchronisation of money and credit cycles (policy proxy). These remain important indicators in 2022 to which I will add a key focus on the mix of lending and the potential impact on any new macroprudential measures. Watch this space…