M3 Money Supply YoY

M3 Money Supply YoY is the annual growth rate of broad money (cash and liquid claims that act like money) in the euro area. It covers liabilities of Monetary Financial Institutions (MFIs), banks, money market funds and central banks resident in the euro area, in any currency. Holders are the money-holding sector (euro-area households, firms and other non-bank residents except central government), never the 27-member European Union as a whole. The series starts in September 1997 and shifts as the euro area enlarges.

It is not bank lending, longer-term bank debt over 2 years, or a simple change in published money stocks.

Stocks refer to month-end, normally the last calendar day, with national data reaching the European Central Bank by the 15th working day after month-end. The euro-area release appears about 4 weeks later on the 19th working day at 10:00 Frankfurt time, shifting only for monetary-policy meeting clashes. Next-year calendar appears by September, national data stay embargoed until release, revisions update earlier periods, and assessment uses a 3-month average.

Each release shows M1 (narrow money) and M2 (intermediate money) growth, contributions, counterparts (accounting sources), securitisation-corrected loans, deposits by sector and annex tables. Quarterly data arrive a month late with a monthly release. Ordinary revisions cover the prior period and exceptional ones reach further back with notes, while website data change with later releases.

M3 moves when households, firms and funds favor liquid bank claims, with component shares drifting and no fixed weights.

• Currency in circulation: banknotes and coins outside banks, the most liquid money.
• Overnight deposits: bank balances usable at once for payments or cash withdrawal.
• Deposits with agreed maturity up to 2 years: time deposits locked briefly, convertible with delay or penalty.
• Deposits redeemable at notice up to 3 months: savings deposits withdrawable after short notice.
• Repurchase agreements, money market fund shares/units and short-term bank debt up to 2 years: marketable instruments close to deposits in liquidity and price certainty.

In August 2023 (press release of September 27, 2023) M3 fell 1.3% from a year earlier, after a 0.4% fall in July. Narrow money M1 (cash plus overnight deposits) plunged 10.4% and subtracted 7.6 percentage points, while short-term deposits excluding overnight jumped 23.7% and added 5.3 points. Marketable instruments grew 20.4% for 1.0 point, while household deposits rose 0.2% and corporate deposits fell 2.4%.

External assets supported growth while longer-term liabilities dragged. The lesson is that falling M3 can hide a shift into time deposits and money-market paper, so always split the headline.

1. Transactions: subtract reclassifications, price revaluations and exchange-rate effects for dollars, pounds, yen and francs from the change in month-end stocks. For example, stocks rising from 16,000 to 16,050 with adjustments of 5 and 3 leave transactions of 42.
2. Notional index: chain prior index by 1 plus transactions divided by prior stocks, with December 2010 set at 100 without affecting growth. For example, prior index 112.40 times 1.002625 gives 112.695.
3. Seasonal and calendar adjustment: use multiplicative X-12-ARIMA or X-13-ARIMA, building M3 indirectly from adjusted M1, M2 minus M1 and M3 minus M2. Trading-day and Easter effects apply, with factors revised yearly at euro-area level.
4. Annual growth: divide the reference month's index by the index 12 months earlier, subtract 1 and multiply by 100. For example, 112.695 divided by 108.90 gives about 3.5% year on year.
5. Monitoring average: assess M3 on a centred 3-month moving average of next, current and prior rates against the 4.5% reference value.