Chinese September money numbers cast doubt on hopes that the economy is regaining momentum.
Six-month growth rates of real M1 and M2 fell last month and have declined significantly since spring 2013, towards levels reached during the 2011-12 “hard landing” scare – see chart. This suggests that economic expansion will slow in late 2013 / early 2014 unless exports pick up on the back of stronger global activity.
Six-month real money growth, moreover, is below that of industrial output, based on an August number for the latter*. There appears, in other words, to be no “excess” liquidity available to boost asset prices.
The fall in real money expansion in September partly reflected a food-driven rise in inflation – likely to reinforce an official bias against further monetary policy easing at present.
*A September figure is due this week.
