China update: money signal positive but policy / global risks

Chinese money trends remain moderately favourable but the economy has been held back by covid disruption and now faces an export threat from global recession. Stocks, meanwhile, have been hit by a ramping up of the Biden administration’s war on Chinese tech along with President Xi’s take-over of economic policy-making, which investors have viewed as […] Continue reading

Eurozone monetary update: false hope from broad money

Eurozone money measures are giving mixed signals. Headline broad money M3 rose by a strong 0.7% in September, pushing six-month growth up to 3.3% (6.6% annualised), the highest since December. Narrow money M1, by contrast, contracted on the month, with six-month growth falling further to 1.8% (3.7% annualised) – see chart 1.  Chart 1 Broad […] Continue reading

UK recession gathering pace at end-Q3

A “monetarist” UK recession probability model used here signalled a 70% likelihood of a recession in 2022 back in March. Coincident data suggest that contraction began in the summer. The model now indicates that the recession will last through Q2 2023, at least.  Monthly GDP figures have been affected by holiday distortions and are often […] Continue reading

G7 inflation peaking on schedule

The “monetarist” rule of thumb that monetary changes feed through to prices with a lag of about two years suggests that G7 consumer price inflation will fall steeply from early 2023.  G7 headline annual CPI inflation, as calculated here*, moved back up to 7.6% in September, just below a June high of 7.7%.  A QE-driven […] Continue reading

UK credit crunch arguing for QT cancellation

Recent dramatic tightening of UK credit conditions along with Bank of England plans for large-scale QT and a “significant” rate hike could tip current weak broad money growth over into contraction, in turn threatening a deflationary depression.  To recap, the preferred broad measure here – non-financial M4, comprising sterling money holdings of households and private […] Continue reading

A “monetarist” perspective on current equity markets

The monetary forecast of global recession in late 2022 / early 2023 appears to be playing out. The latest real money data hint at a bottoming out of economic momentum around end-Q1 2023 but there is no suggestion yet of a subsequent recovery. This message dovetails with cycle analysis, with the stockbuilding cycle now turning […] Continue reading

Should the BoE tighten policy “significantly”?

Bank of England Chief Economist Huw Pill has suggested that fiscal policy easing in the mini-Budget and the reaction in markets warrant a “significant monetary policy response”. Why?  UK monetary trends continue to weaken and are consistent with a medium-term return of inflation to target, if not below.  Annual growth of non-financial M4 – the […] Continue reading