Chart pack and analysis attached.
Chart pack and analysis attached.
Chart pack and analysis attached.
While some of the Chinese activity indicators might have perked up, there is no hiding from the disinflationary pressure stalking China’s economy. April CPI dropped back to 3.3% yoy (4.3% in March) while PPI sunk to -3.1% from -1.5% in the previous month. And the problem would be even worse were it not for persistent food price pressures as the impact of the earlier swine flue epidemic continues to pressure meat prices. Indeed, CPI ex-food is now running at just 0.6%.
There is little sign of a slowdown in credit growth in China as the authorities continue to try and drive cash into the disrupted economy. Total social financing came in at a robust CNY3.09trn while overall new loan growth hit CNY1.701trn. This marks a significant pick up in credit creation, with household debt up nearly 2% pts of GDP since the end of last year while NFC bank debt has jumped from 95% to 102% of GDP.
The monetary mutualisation of Eurozone debt (or its sovereign risk) through the ECB is becoming more likely. The fiscal monetisation of debt through the issue of Coronabonds is becoming less likely. Monetisation is feasible. The arithmetic works. If you add up all projected fiscal deficits in the Eurozone for this year, the total comes to almost exactly the fire power the ECB has approved.
Chart pack and analysis attached.
