Cmpnents f private sectr liquidity Intrductin Mnthly statistics f the mney stck have been published regularly fr sme time, but hithert there have been n cmparable regular statistical tables bringing tgether ther liquid assets. ny definitin f liquidity is inevitably arbitrary and will depend t sme extent n the particular purpse fr which the infrmatin is required. Whatever cncept may be theretically desirable, there are in any event deficiencies in the statistics that are likely t prevent it being measured precisely. It may nevertheless be helpful t assemble, as cnsistently as pssible, thse cmpnents fr which mnthly statistics are available r can be estimated, nt t prvide a unique liquidity aggregate but rather a spectrum f what are generally regarded as liquid assets. The accmpanying table shws a selectin f shrt-term financial assets, arranged in blcks f items that may be viewed as alternatives by their main hlders. In principle, the table is limited t sterling assets within ne year f maturity, r realisable within a year withut significant lss f interest r capital. In practice, it is necessary t depart frm this definitin n ccasin because f inadequate statistics. In mst cases, availability f statistics has meant that the limitatin f ne year n the length t maturity applies t the riginal maturity f the asset in questin rather than t the remaining maturity, althugh fr many purpses the latter might be mre apprpriate. Only liquid assets held by the private sectr ther than banks are included. ll public sectr hldings have been mitted, as the public sectr's ecnmic behaviur is nt affected by changes in its hldings f liquid assets. ccrdingly, the mre helpful cncept f liquidity is ne relating t the liquid assets f the private sectr alne-that is, nt distrted by the inclusin f such assets held by the public sectr, perhaps temprarily and as a result f administrative decisin. The table f cmpnents available). The ttal f the 'mney' blck thus differs frm the usual wider measure f the mney stck-sterling MJ-which includes all time depsits as well as all public sectr depsits. B Other mney-market instruments Treasury bills Bank bills Depsits with lcal authrities Depsits with finance huses Ttal (grss) Finance huses' hldings f 'mney' Fịnance huses' hldings f ther mney-market Instruments Ttal (nett Whereas the 'mney' blck clearly cmes first, there is n natural rder thereafter. The table shws next a blck-named fr cnvenience ther mney-market instruments--cntaining certain ther types f depsits held by persns and cmpanies, in particular depsits with finance huses and lcal authrities, tgether with sme negtiable paper within ne year f maturity held predminantly by the crprate sectr. The latter grup, which cmprises Treasury bills and cmmercial bills accepted by UK banks, is restricted by the availability f statistics. Fr example, cmmercial bills ther than bank acceptances, and varius securities (particularly gilt-edged stcks) that are clse t their maturity date might be included. Hwever, n suitable statistics are available. nther cnsideratin in the case f gilt-edged stcks is that their inclusin wuld mean that the series cntained humps-as large amunts f stck mved t within ne year f maturity-whereas the underlying change in liquidity, as it affects behaviur, is likely t be much smther. Because this blck treats the finance huses as liquidityissuing institutins, their wn hldings f ther mneymarket instruments need t be excluded in arriving at a net ttal. Similarly, if this blck is added t blck as a measure f liquidity, the finance huses' hldings f 'mney' shuld als be excluded. These adjustments are shwn in the table. 'Mney' Ntes and cin in circulatin Sterling bank depsits: Sight Time Certificates f depsit Ntes and cin held by the public are the mst liquid f all assets, with sight depsits with banks clse behind. These tw items cmprise Mt. But the first blck 'mne. y'-als includes certificates f depsit, and time de 'p slts apart frm thse f mre than tw years' ngmal maturity (the nly maturity breakdwn C Savings depsits and securities Shares and depsits with building scieties Depsits with trustee savings banks Depsits with the Natinal Savings Bank Natinal savings securities Ttal (grss) Savings institutins' hldings f 'mney' Savings institutins' hldings f ther mney-market instruments Building scieties' depsits with ther savings institutins 278
The next blck cntains depsits with savings institutins, and certain natinal savings securities. These are predminantly held by persns. Building sciety shares and depsits are abut ne and a half times as large as persnal bank depsits and are verwhelmingly the mst imprtant cnstituent f this blck. Term shares have been excluded, as have 'save as yu earn' depsits with building scieties, as these d nt satisfy the criterin f being realisable within twelve mnths with n significant interest r capital lss. Depsits with trustee savings banks (new departments and rdinary accunts) and rdinary and investment accunts with the Natinal Savings Bank are als included. Natinal savings securities cmprise British savings bnds, premium bnds, and savings stamps and gift tkens. The inclusin f British savings bnds is perhaps particularly debatable as there is a ttal lss f interest if a bnd is surrendered within the first six mnths f its life, and as it appraches maturity the lss f the terminal bnus becmes significant; nevertheless, fr much f their life the interest lss n surrender is small, s they have been included. s with the previus blck, deductins frm the grss ttal are needed t avid duble cunting. Savings institutins' hldings f ntes and cin, bank depsits and ther mney-market instruments are deducted, as are building sciety depsits with ther savings institutins, t give the net ttal. D Certificates f tax depsit Certificates f tax depsit Hldings by building scieties Finally, the table includes certificates f tax depsit (etds) as a separate ptinal item. There are grunds fr including CTDs, as they are a frm f depsit which is smetimes used as a shrt-term investment alternative t items that are clearly part f liquidity. They will usually be bught against a knwn future tax liability, but, prvided there are cntinuing tax liabilities, a cmpany's decisin n surrendering them will be affected by relative interest rates in the same way as wuld its use f ther liquid assets t meet the tax bill. On the ther hand, althugh CTDs can be encashed n demand, there are substantial interest penalties unless they are surrendered in payment f tax. Statistical and ther prblems The table includes nly assets and des nt net ff shrt-term liabilities against them, even thugh fr sme purpses it might be desirable t d s. Fr example, if a cmpany has several bank accunts, sme f which are in credit and sme are verdrawn, it culd be argued that it is the net psitin n all accunts that Cntributes t the cmpany's liquidi ty and affects its behaviur. But t attempt t net ff shrt-term habilities wuld create further prblems f definitin: althugh an verdraft may legally be repayable at shrt ntice, many businesses regard it as a mre permanent surce f finance. This serves t emphasise the arbitrariness f any measure f liquidity and the cautin that is needed in interpreting the statistics. Sme items cannt be included in the table because f lack f infrmatin, while thers have been excluded deliberately. One f the mst imprtant f the latter, particularly fr crprate liquidity, is freign currency depsits with UK banks. These depsits have been excluded mainly because freign currency depsits with banks abrad have t be excluded (fr lack f infrmatin) even thugh, frm the pint f view f the hlder, there is little difference between these and similar depsits with dmestic banks. Mrever, changes in freign currency depsits are mre likely t reflect the hlders' activities in ther cuntries rather than in the United Kingdm. nther area that has been excluded is unused verdraft and credit card facilities, which represent resurces that can be cnverted int liquidity if required. In many cases, they are mre likely t be used t supplement ready cash than are shrt-term assets. (Including facilities wuld be an alternative t netting ff shrt-term liabilities in the case where a cmpany increased its liquid assets by increasing its verdraft, thereby reducing its unused facility.) Suitable statistics n facilities, hwever, are nt available, and the table is restricted t assets actually held. While reasnably cnsistent estimates f liquidity can be assembled n a quarterly basis frm existing published material, it is nt pssible t d this n a mnthly basis because statistics are cllected frm banks n mid-mnthly reprting dates and frm mst ther financial institutins n the last day f the mnth. Because the banking statistics are mre vlatile than the figures fr ther liquid assets, and this vlatility is particularly large arund the end f the calendar mnth, it is difficult t estimate end-calendar mnth banking figures frm statistics that relate t mid-mnth dates. The banking statistics have, therefre, been left unchanged and ther series have been adjusted t mid-mnthly dates. The vlume f transactins in building sciety shares and depsits (the main nn-bank cmpnent f liquidity) tends t be heavier in the first week r s f each mnth and t be spread mre evenly ver the rest f it; s that, by using weekly infrmatin frm large building scieties, adjustments can be made that prvide a reasnably reliable guide t the mid-mnth psitin. The resulting figures are therefre in sme cases nly apprximate, but it is nevertheless wrth attempting t adjust figures twards a cnsistent date rather than simply adding tgether thse fr different dates. Even mre estimatin is needed in the case f certain items fr which n mnthly figures are available and which therefre have had t be interplated frm a quarterly series. Estimates f depsits with lcal authrities are especially weak, and they are subject t revisin fr several mnths after the perid t which they relate. Infrmatin abut the hldings f liquidity (particularly cash and bank depsits) by thse nn-bank financial institutins which are deducted within blcks B and C is als particularly uncertain. The ntes t the 279
table give mre details f hw the series have been cmpiled and f their quality. The statistics are still experimental, and it is hped that they can be imprved in time. Seasnal adjustment presents anther area f statistical difficulty. There are knwn t be strng seasnal influences n the mnetary aggregates, and adjustments t these can be applied t the 'mney' blck f this table. Fr building sciety shares and depsits, the next largest item in the table, there are n seasnal adjustments available at mid-mnth dates, but it is pssible t use the seasnal adjustments calculated fr interest credited t building sciety accunts, because interest is generally credited early in the mnth. Seasnal influences n ther cmpnents f the table are prbably small, but mre extensive wrk wuld be required befre they culd be identified. Cnclusin The table prvides cmpnents f liquidity in a frm that emphasises the range f items and the similarities and differences between them. It may be apprpriate fr sme purpses t exclude certain items, and the table allws fr this t be dne. Items have been gruped int blcks f bradly similar liquid assets, and sub-ttals f these blcks are shwn; the sub-ttals have als been added prgressively. These ttals relate t liquidity held by slightly different grups within the private sectr because f the subtractin at each stage f hldings by liquidity-issuing institutins. Fr example, the ttal f all the blcks prvides a measure f liquidity f the private sectr ther than banks, finance huses and ther savings institutins. Hwever, it must be stressed that there is n single crrect measure and ther ways f adding up and presenting the figures are pssible. It has already been explained that the table is experimental. Further wrk is needed t imprve bth statistical surces and methds f estimatin; this will be attempted when resurces permit and if-as the data becme mre numerus and familiar-the statistics can be shwn t have relevance t the private sectr's behaviur. The frm f the table may need t evlve as experience is gained in using it. Fr the time being, updated figures fr this table will be included in the statistical annex in future issues f the Bulletin. 280
Cmpnents f private sectr liquidity millins 1975 1976 1977 1978 1979 June July ug. Sep!. Dc!. Nv. Dec. Jan. Feb. Mar. pr. June July 'Mney' Ntes and cin in circulatin Sterling bank depsits: 5,258 5.898 6,603 7.693 7.814 8.186 8.130 8.160 8.184 8.258 8.682 8.382 8.594 8.689 8.862 8.833 8.804 9.230 Sigh I Time Certificates f depsit 9.752.541 941 11,4 18.005 793 12,723 18,576 961 16.1 20.383 1.131.732 20.676 1.059 16.122 20.781 1.113 16.314 20.541 1.111 16.421 20.811 989 16.876 20.971 992 16.841 21.102 1.013.406 21.102 982.8 21.808 946 16.725 21.7 906 16.933 21.355 870 18.276 21.389 886 18.119 22.220 800.744 22.952 807 18.090 23.185 769 Tlal 33,492 36,133 38,863 45,2 45,281 46,202 46,096 46.381 47,023 47,214 48.2 48.294 47,882 47.847 49,413 49,972 50,307 51,274 Ttal (seasnally adjusted) 34,061 36,472 39,281 45,230 45,482 46,051 46.387 46.782 47.021 47.728 48.700 48.910 48.704 49,338 50,186 50,6 51.207 BOther mney market instruments Treasury bills Bank bills Depsits with lcal authrities Depsits with finance huses 134 395 2.877 227 1.014 355 2.640 257 708 9 2,730 302 769 8 2,441 322 7 2 2.322 336 468 289 2.334 327 323 527 2.418 325 283 692 2.500 340 221 799 2.5 345 256 759 2.471 358 169 818 2.482 354 257 811 2.584 354 162 663 2.757 6 242 723 3.077 368 355 8 359 350 784 4 525 1.111 386 347 1.2 380 Tlal (grss) 3,633 4,266 4,119 3,690 3.612 3.418 3.593 3.8 3.882 3.844 3,823 4,006 3,958 4,410 4.919 4.848 5,362 5.332 Finance huses' holdings f 'mney' Finance huses' hldings f ther 30 28 31 44 50 55 59 61 59 53 46 42 42 54 mney-market instruments 16 21 11 10 10 11 16 14 22 22 3,598 4,222 4,067 3,6 3,554 3.355 3,527 3.747 3.8 3,780 3,767 3.954 3,905 4.340 4,840 4.766 5,275 5,245 C Savings depsits and securities Shares and depsits with building scieties Shares and depsits wilh building scieties (seasnally adjusled) Depsits with trustee savings banks Depsits with the Natinal Savings Bank Natinal savings securities 18.856 19,023 3.724 2.125 1,910 22.575 22,770 4.4 2.195 2.018 25.254 25,516 4.324 2.410 1.977 30.542 30,739 4.,754 3.333 2.1 31.034 31.023 4.771 3.3 2.145 31.249 31.206 4.809 3.121 2.2 31.362 31.447 4.822 2.971 2.147 31.706 31.814 4.882 2.971 2.7 32.016 32.226 4.9 3.006 2.166 32.328 32.638 5.006 3.014 2.8 32.9 32.9 4.939 3.002 2.5 33.349 33,288 4.989 3.060 2.184 33.623 33.719 5.073 3.106 2.180 33.824 33.946 5.134 3.2 2.183 34,023 34.269 5.9 3.187 2.185 34.283 34.660 5.208 3.231 2.188 35.099 35.128 5.214 3.245 2.185 35.454 35.384 5.242 3.262 2.168 Tlal (grss) 26,6 30,942 33,9 40,766 41,287 41,331 41,302 41.716 42.125 42,526 43.033 43.582 43.982 44.293 44,574 44,910 45.743 46,126 Savings institutins' hldings f 'mney' Savings institutins' hldings f ther 635 745 6 9 932 1.040 1.095 1.1 1.253 1.351 1.406 1.405 1.314 1.120 982 978 987 992 mney-market instruments Building scieties' depsits with ther 711 660 742 1.196 1.166 953 855 885 864 820 748 733 746 834 912 940 929 919 savings institutins TlDI (nel) 25,269 29,5 124 32,484 304 38,349 316 38.873 160 39.8 25 39,327 39.649 39.991 40,338 40.862 14 41.430 41.907 42.324 42.6 42,977 43,812 44.200 TOlal (nel; seasnally adjusled) 25,436 29,732 32,746 38.546 38,862 39.135 39.412 39.757 0.201 40.648 40.862 41.369 42.003 42.446 42.91/ 43.354 43.841 4.130 Certificates f tax depsit Certificates f lax depsit 339 0 404 399 700 852 602 936 8 7 1.0 1.494 1.385 1.463 1.482 Hldings by building scieties 43 296 32 338 30 4 362 48 2 60 792 71 531 87 849 110 755 142 575 184 1,186 218 1,276 203 1,182 214 1.249 216 1,266 Ttals +B (nel) +B (net)+c (nel) +B (nel)+c (nel)+o (nel) 33.492,090 62,359 62,359 36,133 40.355 69.892 69.901 38,863 42.930 75.414 75.451 45.2 49.009 87,358 87.4 45.281 48.835 87.708 88.046 46.202 49.557 88.735 89.109 46.096 49.623 88.950 89.312 46.381 50.128 89.777 90.429 47.()23 50.838 90.829 91.621 47.214 50.994 91.332 91.863 48.2 51.939 92.801 93.0 48.294 52.248 93.678 94.433 47.882 51.787 93.694 94.269 47.847 52.187 94.511 95.697 49.413 54.253 96.918 98.194 49.972 54.738 97.7 98.897 50.307 55.582 99.394 100.643 51.274 56.519 100.719 101.985 Ttals (seasnally adjusled) +8 (nel) +8 (nel)+c (nel) +8 (nel)+c (nel)+d (nel) 34,061,9 63,095 63,095 36,472 40,694 70.426 70,435 39,281 43,348 76,094 76,131 45.230 48,867 87,413 87.709 45,482 49.036 87.898 88,236 49.406 88,541 88.9 49,578 88.990 89,352 46.387 50.134 89.891 90.543 46,782 50.597 90.798 91.590 47.021 50.801 9U49 91.980 47.728 51.495 92.357 93.206 48.700 52.4 94.023 94.778 48.910 52.8 94.818 95.393 48.704 53.044 95.490 96.676 49.338 54.8 97.089 98.3 50.186 54.952 98.306 99.488 50.6 55,931 99,772 101.021 51.207 56,452 100.582 101.848 N 00
Ntes n surces Blck, 'Mney' Ntes and cin in circulatin and private sectr sterling sight depsits with banks cmprise the narrw mnetary aggregate, M, (see Table 11.1 in the statistical annex). Private sectr sterling time depsits with banks exclude depsits f an riginal maturity f mre than tw years; this is the nly maturity breakdwn available and is used here as the best apprximatin available fr depsits f mre than ne year t maturity. On the ther hand, certificates f depsit f all maturities are included, and are shwn separately. The seasnal adjustments applied t the figures are thse used in the adjustment f the private sectr cmpnent f sterling M,; depsits with a maturity f mre than tw years are assumed t have n seasnal pattern. Blck B, Other mney-market instruments Treasury bills are estimated as the residual f bills in market hands less the identified hldings f the banking sectr, verseas residents and public sectr bdies. Bank bills are cmmercial bills accepted by a UK bank. They ar.e estimated by deducting ttal hldings f bank bills by the banking sectr and the Issue Department f the Bank f England frm the utstanding ttal f acceptances made by listed banks. Depsits with lcal authrities are currently estimated nly at endcalendar quarters. The mnthly series has been interplated r prjected frm these quarterly figures, and is therefre subject t revisin when the latest quarter's infrmatin becmes available. Cnsequently, f all the estimates these are perhaps the prest in quality. Revenue bills issued by lcal authrities are almst entirely held by banks and fficial hlders; there is n reliable infrmatin n the very small hldings by ther sectrs s these have been excluded. Depsits with finance huses can be estimated at the banks' midmnthly reprting dates frm returns made by thse finance huses subject t credit cntrl (the largest nes). These appear t prvide a reliable series fr changes fr all finance huses althugh the 'true' amunt utstanding is prbably understated by 10% r s. The figures are nt grssed up t allw fr this. Finance huses' hldings f 'mney' are interplated r prjected frm end-quarterly figures and cnsequently are f pr quality. Finance huses' hldings f ther mney-market instruments. Hldings f Treasury and bank bills at banks' mid-mnth reprting dates are knwn fr thse finance huses subject t credit cntrl; the figures fr bank bills include nly thse bills qualifying as reserve assets. Blck C, Savings depsits and securities Shares and depsits with building scieties exclude term shares f an riginal maturity f ver ne year and all S YE depsits and (frm July 1978) shares and depsits held by verseas residents. Building scieties' figures as at the banks' mid-mnth reprting dates are estimated by adding, t the end-calendar mnth ttals, changes calculated frm weekly returns made by the largest scieties (which currently accunt fr sme 75% f all building sciety activity), grssed up t represent all scieties. It is assumed that interest is credited in the first week f the calendar mnth; althugh cmmn, this practice may nt be universal. Mnthly estimates fr S YE depsits and verseas residents' shares and depsits are interplated r prjected frm quarterly figures. N seasnal adjustments are available fr mid-mnth estimates f shares and depsits; the seasnal adjustments applied here relate nly t the pattern f interest credited t accunts. Depsits with trustee savings banks are available at the banks' midmnth reprting dates and include new departments and rdinary accunts. The whle f net debit transit items etc. have been deducted frm depsits. Depsits with the Natinal Savings Bank include rdinary and investment accunts. Figures are currently available nly fr endcalendar mnths; it is hped that mid-mnthly data will eventually becme available, but these are nt expected t make a material difference t the series as mnthly changes are small and stable. Natinal savings securities cmprise British savings bnds, premium savings bnds and natinal savings stamps and gift tkens; all three at present are measured at end-calendar mnths. Savings institutins' hldings f 'mney'. The trustee savings banks' hldings are available n the banks' mid-mnth reprting dates; building scieties' hldings (which can be quite vlatile) are interplated r prjected frm end-quarterly figures and cnsequently are f pr quali ty. Savings institutins' hldings f ther mney-market instruments. Hldings f Treasury bills by the trustee savings banks and the Natinal Savings Bank are available as at the banks' mid-mnth reprting dates; building scieties' hldings are interplated r prjected frm quarterly data. Savings institutins' depsits with lcal authrities are interplated r prjected frm quarterly infrmatin. with the exceptin f thse f trustee savings banks, which are available as at the banks' mid-mnth reprting dates. Building scieties' depsits with Olher savings institutins presently cmprise building scieties' depsits with the Natinal Savings Bank. Blck D, Certificates f tax depsit Certificates f tax depsit are calculated by residual-ttal utstanding less hldings by banks-as at banks' mid-mnth reprting dates. Hldings by savings institutins, f which nly building scieties' hldings can be separately identified, are interplated r prjected frm quarterly figures. 282