Quite a slowdown in credit growth during October, certainly compared to the rate we saw last year. While the trend for shadow sector deleveraging continues there was also quite a sharp slowing of bank loans. Corporate bond issuance remained muted while there was a pronounced deceleration in the ‘other’ category, which now encompasses local government bond issuance.
Eurozone saw a renewed uptick in money supply growth in August, but it was driven by a further increase in M1 rather than broader money. Credit growth seems to be on a firmer footing, with strength being driven by France and Germany while in Italy and Spain we’re still seeing deleveraging, notably on the corporate side. And deposits still growing faster, suggesting some caution. Quite positive from the ECB’s perspective, particularly with the latest easing package yet to factor.
Chinese August money supply and credit data was in line with market expectations. Money supply growth remains stable. Even if M2 was fractionally above estimates the broad money growth rate has been basically static for the past eighteen months. On the credit side loan growth picked up a little from last month, but overall not that different to what we saw this time last year.
Stronger than expected rise in credit during June with the culprit appearing to be an increase in local government bond issuance, reflecting official efforts to support the domestic economy. Loan growth continues to run well ahead of nominal GDP. And with no underlying pick up in money supply growth the velocity measures also remain weak.
Money supply continues to tick up again, but overall there is not much to suggest we’re in any marked re-acceleration phase, which is equally evident in the persistently weak money multipliers. Credit data surprised on the downside thanks to some moderation in consumer demand for money. Non-financial side looks stronger.
Money supply growth remains steady. Credit growth has quickened a touch from April but overall there isn’t much evidence that the governments stimulus efforts have opened the credit spigots, particularly the private sector. Debt is growing a little faster than GDP again, but not markedly.
Eurozone putting together some better credit figures in April (once adjusting for sales and securitisations) amid strong growth in non-financial corporate borrowing in Germany and consistently strong credit demand (at both a corporate and consumer level) in France. This growth has more than offset ongoing weakness in Italy, where NFC lending continues to contract rapidly.
Underlying money supply growth remains weak, reflected in M2’s shrinking share relative to GDP. But the credit multipliers do look better, with some upward momentum suggesting that efforts to spur lending have been working, and the right type of lending as seen by the ongoing contraction of borrowing from the shadow banking sectors.
Money supply growth has picked up again but it’s being driven by a rise in M1, specifically overnight money. Velocity continues to fall. Credit growth meanwhile remains in the doldrums.
A solid set of credit numbers, suggesting the government is succeeding in reopening this transmission channel, which should begin to show up more notably in the activity and growth data from hereon in.
People are always keen to write off China. Its authoritarian regime has built up malinvestments and debt beyond that of any other emerging economy, both in nominal terms and as a share of GDP. Even its GDP is often deemed to be over-inflated. But we are not on the cusp of a collapse. For a start, China’s financial system still has relatively closed circuitry, with the money being owed mostly by state-owned enterprises (SOEs) to state-owned banks, meaning relatively modest connectivity to the wider world.
As inflation rises global capital will be repriced. The process will start in the US, though the UK may be…