Commentary on Friday suggested that Chinese money trends had improved but were still far from signalling economic strength. Additional March data released today reinforce a cautious interpretation.
The key measure monitored here is true M1, which adds household demand deposits to the official M1 aggregate to align with the internationally-recognised M1 definition. The demand deposit information is usually released several days after the headline money data. Friday’s commentary assumed that household demand deposits rose by 2.0% month-on-month in March. This was a reasonable assumption because such deposits normally move in the same direction as total household deposits but by a larger percentage – total deposits increased by 1.1% last month.
The additional details were released today – earlier than usual – and show that household demand deposits fell by 1.0% in March. Annual true M1 growth, therefore, was 5.2% rather than the estimated 6.3%. Six-month growth, seasonally adjusted but not annualised, was 2.7% versus 3.8%. This still represents an improvement from February but the recent recovery is unimpressive – see first chart.
This also has implications for global six-month real narrow money growth, which is now estimated at 1.4% in March rather than 1.6%, implying that last month’s decline reversed half of the recovery between October and February – second chart.
