
Record low post-covid M2 velocity is notable given very high price levels (inflation) and recent y/y declines in the M2 money supply.
M2 Velocity Key Points
- M2 velocity ([price level * transaction quantity]/money supply) represents the number of times one dollar is spent to buy goods & services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.
- The current record low post-covid M2 velocity ratio reveals a sharp reduction in transaction volumes throughout the entire economy, consistent with negative retail traffic numbers which have become typical post-covid (as discussed in this post).
