{"id":4725,"date":"2024-06-08T09:03:19","date_gmt":"2024-06-08T09:03:19","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=4725"},"modified":"2025-03-27T15:50:45","modified_gmt":"2025-03-27T15:50:45","slug":"global-monetary-update-further-details","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=4725","title":{"rendered":"Global monetary update: further details"},"content":{"rendered":"

Previous posts<\/a> 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).<\/p>\n

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.<\/p>\n

Unexpectedly, however, the narrow M1A measure tracked here – comprising currency in circulation and demand deposits – rose by a bumper 1.8% in April. This follows a 1.3% gain in March – see chart 1.<\/p>\n

Chart 1<\/strong><\/p>\n

\"\"<\/span><\/span><\/p>\n

Positive narrow money divergence typically occurs when rates are falling. Lower rates encourage a shift of money holdings from time deposits and savings accounts to demand deposits and cash. Such a shift is usually a signal of rising spending intentions.<\/p>\n

Are money-holders front-running rate cuts? The narrow money pick-up is a hopeful signal but there is a risk that it goes into reverse if the Fed continues to delay.<\/p>\n

The impact of the US April rise on the global aggregate calculated here was offset by a large monthly drop in Chinese narrow money, as measured by “true M1”, which corrects for the omission of household demand deposits from official M1.<\/p>\n

So the six-month rate of change of global real narrow money was little changed in April, following a move back into positive territory in March – see prior post<\/a> for more discussion.<\/p>\n

US six-month momentum moved to the top of the ranking across major economies in April, while China returned to negative territory – chart 2.<\/p>\n

Chart 2<\/strong><\/p>\n

\"\"<\/span><\/span><\/p>\n

Falling interest rates suggest that the Chinese relapse will prove temporary – chart 3 – but the signal for near-term economic prospects is negative.<\/p>\n

Chart 3<\/strong><\/p>\n

\"\"<\/span><\/span><\/p>\n

Eurozone \/ UK real narrow money momentum continued to recover in April but remains negative. The current UK lead may prove temporary unless the MPC follows the ECB in cutting rates soon.<\/p>\n

The Chinese relapse resulted in E7 real money momentum falling back in April, while G7 momentum crossed into positive territory – chart 4.<\/p>\n

Chart 4<\/strong><\/p>\n

\"\"<\/span><\/span><\/p>\n

The still-positive E7 \/ G7 gap coupled with a recent cross-over of global six-month real narrow money momentum above industrial output momentum could signal improving prospects for EM equities. The MSCI EM index outperformed MSCI World by 10.5% pa on average historically under these conditions.<\/p>\n

G7 annual broad money growth recovered further in April but, at 2.8%, remains well below a 2015-19 average of 4.5% – chart 5.<\/p>\n

Chart 5<\/strong><\/p>\n

\"\"<\/span><\/span><\/p>\n

The roughly two-year leading relationship suggests that annual inflation will bottom out in H1 2025 but remain at a low level into H1 2026.<\/p>\n

—–
\nCOMMENT:
\nAUTHOR: David Cotton
\nEMAIL:
\nIP: 81.150.175.79
\nURL:
\nDATE: 06\/08\/2024 09:03:19 AM<\/p>\n

Is M1A similar to CURRDD on Fred? Usually it rises from the year before on a % basis at the start of recessions? <\/p>\n

So we should expect it to rise now.<\/p>\n","protected":false},"excerpt":{"rendered":"

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 […]<\/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-4725","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\/4725","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=4725"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4725\/revisions"}],"predecessor-version":[{"id":7034,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4725\/revisions\/7034"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4725"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}