<p>No, the data seems to be off by about a year. The Trading Economics website states that the source of their data is the Federal Reserve. Fed makes its data avaiable via FRED dataset.</p>
<p><a href="https://fred.stlouisfed.org/series/M1NS" rel="nofollow noreferrer">FRED data</a> show large increase in M1, but not in 2021 but in 2020 as you can see below. The numbers are also bit off between trading economics and FRED data. However, the FRED data show even larger growth of 233% between April and May 2020.</p>
<p><a href="https://i.sstatic.net/imKFx.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/imKFx.png" alt="enter image description here" /></a></p>
<p>There actually was change in methodology from April to May, as <a href="https://fred.stlouisfed.org/series/M1NS" rel="nofollow noreferrer">FRED explains</a>:</p>
<blockquote>
<p>Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.</p>
</blockquote>
<blockquote>
<p>Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.</p>
</blockquote>
<p>However, the change in methodology does not actually fully or even mainly explains the increase. Actually <a href="https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/" rel="nofollow noreferrer">FRED itself released an explainer</a> of what is behind this increase. As they state:</p>
<blockquote>
<p>This increase is shown in the FRED graph above (red line), where we measure M1’s opportunity cost as the one-year U.S. Treasury yield (green line). In late February and early March of 2020, the Fed cut its policy interest rate dramatically to help ease credit conditions during the COVID-19 crisis. The resulting acceleration in the supply of M1 can be understood largely as banks accommodating an increase in people’s demand for money. However, the opportunity cost of money has remained more or less constant throughout 2020, over which time M1 growth has accelerated. What might account for this behavior?</p>
</blockquote>
<blockquote>
<p>To help answer this question, we’ll need to talk a bit about banking regulations…</p>
</blockquote>
<blockquote>
<p>One factor responsible for this behavior may be related to a change earlier this year to Regulation D: The Federal Reserve requires banks to hold reserves against checkable deposits. But the regulation does not require banks to hold reserves against savings and money market accounts, which restrict depositors to no more than six transfers or withdrawals per month. These latter accounts are highly liquid (and in the case of some money market funds, even checkable). But because they’re not as convenient as checkable deposits, they typically compensate depositors with a more attractive interest rate.</p>
</blockquote>
<blockquote>
<p>Another measure of the money supply adds these savings deposits and checkable money funds to M1: It’s known as, you guessed it, M2. From the graph, we see that the growth rate of M2 has remained relatively stable since May 2020. This suggests that the rapid acceleration in M1 since May 2020 is mainly from money moving out of the non-M1 components of M2 into M1, rather than reflecting any acceleration in the demand for transaction balances.</p>
</blockquote>
<p>Indeed as you can see from the graph below (<a href="https://fred.stlouisfed.org/series/M2SL" rel="nofollow noreferrer">FRED</a>), M2 (which is far more relevant economically - this is typically what economists refer to when they talk about money supply without qualification), increased much more slowly and not as much (there was about 15% increase between February 2020 and May 2020, this was because Fed decided to monetize part of the Covid stimulus see this <a href="https://som.yale.edu/blog/monetization-of-fiscal-deficits-and-covid-19-primer" rel="nofollow noreferrer">Yale explainer</a> or this <a href="https://www.brookings.edu/research/fed-response-to-covid19/" rel="nofollow noreferrer">Brookings explainer</a>):</p>
<p><a href="https://i.sstatic.net/UFmVf.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/UFmVf.png" alt="enter image description here" /></a></p>

CC BY-SA 4.0
2021-07-23T20:47:39.143Z
FYI I have contacted Trading Economics and they have updated the data, mentioning that there actually was a change in methodology from April to May (I guess they refer to 2020, not 2021).
bluenote10
CC BY-SA 4.0
2021-07-23T20:52:52.403Z
@bluenote10 as I mentioned in my answer there was change in methodology that is not disputed but as the explainer from fed states this was also because banks changed some of the M2 money into M1 money, if you look at the new update in trading economics there is still jump in M1, but it is jump only in M1 (M1 is not really **the** money supply, it just shows few very specific components of money supply). If you care about economy-wide money supply you need to go to M2 or even broader measures (e.g. M3)
1muflon1
CC BY-SA 4.0
2021-07-18T21:34:32.497Z
2021-07-18T21:34:32.497Z
1muflon1
<p><a href="https://tradingeconomics.com/united-states/money-supply-m1" rel="nofollow noreferrer">tradingeconomics</a> shows an M1 money supply of the past year as follows:</p>
<p><a href="https://i.sstatic.net/9kEdh.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/9kEdh.png" alt="enter image description here" /></a></p>
<p>This suggests an unusually high increase of ~170% in February 2021.</p>
<p>Is this increase real or somehow an artifact of the way the data has been generated, e.g., if an underlying definition related to M1 has changed suddenly?</p>
<p><strong>Update</strong>: Trading Economics have updated their data.</p>

<money-supply><federal-reserve>
Has there really been a 170% increase in M1 money supply in the US in February 2021?
bluenote10
# Has there really been a 170% increase in M1 money supply in the US in February 2021?

(Asked by: username_0 on 2021-07-18)

[tradingeconomics](https://tradingeconomics.com/united-states/money-supply-m1) shows an M1 money supply of the past year as follows:

[![enter image description here](https://i.sstatic.net/9kEdh.png)](https://i.sstatic.net/9kEdh.png)

This suggests an unusually high increase of ~170% in February 2021.

Is this increase real or somehow an artifact of the way the data has been generated, e.g., if an underlying definition related to M1 has changed suddenly?

**Update**: Trading Economics have updated their data.

**Tags:** money-supply, federal-reserve

---

## 1 answers

### Answer by username_1 on 2021-07-18. Score: 3 | Accepted answer

No, the data seems to be off by about a year. The Trading Economics website states that the source of their data is the Federal Reserve. Fed makes its data avaiable via FRED dataset.

[FRED data](https://fred.stlouisfed.org/series/M1NS) show large increase in M1, but not in 2021 but in 2020 as you can see below. The numbers are also bit off between trading economics and FRED data. However, the FRED data show even larger growth of 233% between April and May 2020.

[![enter image description here](https://i.sstatic.net/imKFx.png)](https://i.sstatic.net/imKFx.png)

There actually was change in methodology from April to May, as [FRED explains](https://fred.stlouisfed.org/series/M1NS):

> Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

> Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

However, the change in methodology does not actually fully or even mainly explains the increase. Actually [FRED itself released an explainer](https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/) of what is behind this increase. As they state:

> This increase is shown in the FRED graph above (red line), where we measure M1’s opportunity cost as the one-year U.S. Treasury yield (green line). In late February and early March of 2020, the Fed cut its policy interest rate dramatically to help ease credit conditions during the COVID-19 crisis. The resulting acceleration in the supply of M1 can be understood largely as banks accommodating an increase in people’s demand for money. However, the opportunity cost of money has remained more or less constant throughout 2020, over which time M1 growth has accelerated. What might account for this behavior?

> To help answer this question, we’ll need to talk a bit about banking regulations…

> One factor responsible for this behavior may be related to a change earlier this year to Regulation D: The Federal Reserve requires banks to hold reserves against checkable deposits. But the regulation does not require banks to hold reserves against savings and money market accounts, which restrict depositors to no more than six transfers or withdrawals per month. These latter accounts are highly liquid (and in the case of some money market funds, even checkable). But because they’re not as convenient as checkable deposits, they typically compensate depositors with a more attractive interest rate.

> Another measure of the money supply adds these savings deposits and checkable money funds to M1: It’s known as, you guessed it, M2. From the graph, we see that the growth rate of M2 has remained relatively stable since May 2020. This suggests that the rapid acceleration in M1 since May 2020 is mainly from money moving out of the non-M1 components of M2 into M1, rather than reflecting any acceleration in the demand for transaction balances.

Indeed as you can see from the graph below ([FRED](https://fred.stlouisfed.org/series/M2SL)), M2 (which is far more relevant economically - this is typically what economists refer to when they talk about money supply without qualification), increased much more slowly and not as much (there was about 15% increase between February 2020 and May 2020, this was because Fed decided to monetize part of the Covid stimulus see this [Yale explainer](https://som.yale.edu/blog/monetization-of-fiscal-deficits-and-covid-19-primer) or this [Brookings explainer](https://www.brookings.edu/research/fed-response-to-covid19/)):

[![enter image description here](https://i.sstatic.net/UFmVf.png)](https://i.sstatic.net/UFmVf.png)

> **Comments:**
> **username_0**: FYI I have contacted Trading Economics and they have updated the data, mentioning that there actually was a change in methodology from April to May (I guess they refer to 2020, not 2021).  
> **username_1**: @bluenote10 as I mentioned in my answer there was change in methodology that is not disputed but as the explainer from fed states this was also because banks changed some of the M2 money into M1 money, if you look at the new update in trading economics there is still jump in M1, but it is jump only in M1 (M1 is not really **the** money supply, it just shows few very specific components of money supply). If you care about economy-wide money supply you need to go to M2 or even broader measures (e.g. M3)  

---

