{"id":3170,"date":"2011-02-25T13:27:08","date_gmt":"2011-02-25T13:27:08","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3170"},"modified":"2025-03-27T15:49:12","modified_gmt":"2025-03-27T15:49:12","slug":"eurozone-m1-weakness-extending-into-core","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3170","title":{"rendered":"Eurozone M1 weakness extending into core"},"content":{"rendered":"<p>Monetary trends continue to suggest deteriorating Eurozone economic prospects.<\/p>\n<p>Narrow money M1 is a better economic leading indicator than the broader M3 measure; it weakened before the last recession and surged before the recovery. M1 comprises currency in circulation and overnight deposits &ndash; forms of money more likely to be related to economic transactions. Six-month M1 growth has slumped from 3.6% (not annualised) in August to 0.2% in January. With CPI inflation picking up, real M1 is contracting at a similar pace to early 2008, just before output cratered &ndash; see first chart.<\/p>\n<p>This weakness contrasts with a strong pick-up in US real M1 expansion, which predated the start of QE2 in early November &ndash; second chart. Together with US fiscal stimulus &ndash; particularly the temporary 100% bonus depreciation allowance &ndash; this suggests much faster economic growth in the US than Euroland this year, with possible implications for relative equity market performance and the euro-dollar exchange rate. (A similar monetary divergence in 1991 was associated with superior US equity returns, partly due to a stronger dollar.)<\/p>\n<p>Eurozone M3 trends are also soft, with a rise of only 0.5% in the six months to January, again implying real contraction.<\/p>\n<p>M1 weakness was initially focused on peripheral economies but has now extended to the core, including Germany &ndash; third chart. Consensus hopes that German economic strength will insulate core economies from a peripheral &#8220;double-dip&#8221; look increasingly fanciful. ECB hawks may struggle to gain traction against this backdrop.\ufeff<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/chart2_25-02-2011.gif?__SQUARESPACE_CACHEVERSION=1298644511957\" alt=\"\" \/><\/span><\/span><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/chart3_25-02-2011.gif?__SQUARESPACE_CACHEVERSION=1298644541527\" alt=\"\" \/><\/span><\/span><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/chart4_25-02-2011.gif?__SQUARESPACE_CACHEVERSION=1298644564923\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Monetary trends continue to suggest deteriorating Eurozone economic prospects. Narrow money M1 is a better economic leading indicator than the broader M3 measure; it weakened before the last recession and surged before the recovery. M1 comprises currency in circulation and overnight deposits &ndash; forms of money more likely to be related to economic transactions. Six-month [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3170","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3170"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3170\/revisions"}],"predecessor-version":[{"id":5479,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3170\/revisions\/5479"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}