Broad money growth has slowed slightly, with the annual growth rate of M3 measure falling to a six-month low of 5.6% in April. More importantly, however, the growth rate of bank loans continues to accelerate and hit 8.1% last month. At this stage, however, bank loans is a much better gauge of the health of the economy. Bank loan growth began to accelerate in early 2014 and that strength has been widespread, with improvement evident in every major loan category. Admittedly, the latest survey evidence points to a slowdown in the growth of bank loans to businesses, but only a very modest one. Moreover, that potential slowdown in the growth of bank loans to businesses may be offset by a surge in residential mortgages. In particular, at the start of this year mortgage applications finally began to rebound. Businesses are also raising funds freely in the bond market.
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