Eurozone money trends remain too weak to support an economic recovery. A relapse in the latest business surveys could mark the start of a “double dip”. Three-month rates of change of narrow and broad money – as measured by non-financial M1 and M3 – were zero and 3.3% annualised respectively in May. Continue reading

A recovery in the OECD’s US composite leading indicator could be reversing, in which case recent underperformance of cyclical equity market sectors versus defensives could extend. The OECD indicator receives less attention than the Conference Board US leading economic index but its historical performance compares favourably. The correlation coefficient of six-month rates of change is maximised with a two-month lag on the OECD indicator, i.e. the OECD measure slightly leads the Conference Board index. Continue reading

Chinese May money numbers were weak even allowing for a distortion from a recent regulatory change. The preferred narrow and broad aggregates here are “true M1” (which corrects the official M1 measure for the omission of household demand deposits) and “M2ex” (i.e. M2 excluding bank deposits held by other financial institutions – such deposits are volatile and less informative about economic prospects). Six-month rates of change of these measures fell to record lows in May. Continue reading

The Bank of Japan’s attempt to withdraw policy accommodation is understandable but misguided. Monetary weakness suggests that the economy is on course to return to deflation. The BoJ’s difficulties stem from the inflationary policy mistake of the Fed and other G7 central banks in 2020-21. Continue reading

Previous posts suggested that a recovery in US money growth would stall in Q2 / Q3 as Fed QT was no longer offset by monetary deficit financing (at least temporarily). The broad M2+ measure – which adds large time deposits at commercial banks and institutional money funds to published M2 – fell by 0.1% in April, with available weekly data suggesting marginal growth in May. Unexpectedly, however, the narrow M1A measure tracked here – comprising currency in circulation and demand deposits – rose by a bumper 1.8% in April. Continue reading

Global (i.e., G7 plus E7) six-month real narrow money momentum returned to positive territory in March, consolidating in April. It has also crossed above six-month industrial output momentum, turning one measure of global “excess” money positive. Should investors, therefore, adopt a positive view of economic and market prospects? Continue reading