Chinese money trends signalling solid H2 economy
Simon Ward
Post a Comment
Chinese monetary statistics for June suggest that economic growth will rise through end-2014.
A post two months ago noted that monetary trends had turned positive and were signalling a summer revival in economic momentum, following a slowdown in early 2014. This forecast has received support from stronger purchasing managers’ surveys in May and June and should be confirmed by June industrial output released tomorrow.
The monetary backdrop, meanwhile, has improved further: six-month expansion of real (i.e. inflation-adjusted) M2 and M1 rose to 20- and 13-month highs respectively in June – see first chart. Allowing for the typical half-year lead, the economic growth upswing should last through end-2014, at least.
Real credit trends have also firmed modestly, although the broad “total social financing” measure is still growing more slowly than a year ago – second chart.
The monetary pick-up partly reflects policy easing in response to a softening property market and below-target inflation – market interest rates have been on a gently declining trend since end-2013. Policy-makers may move to the sidelines if the economy firms as expected and house price inflation stabilises – likely based on the historical relationship with monetary trends.
View Printer Friendly Version
Email Article to Friend
Reader Comments