Another relatively solid month on the credit side. China’s August new yuan loans came in at CNY1.22trn vs. the CNY1.3trn median forecast but total social financing hit CNY2.96trn (mkt 2.75trn) amid a rebound in corporate bond issuance and solid local government financing numbers. Money supply meanwhile looks soft, M2 at 8.1% (mkt 8.4%) and M1 slowing to 4.2%, the weakest reading since February last year.
While China’s May money supply and credit numbers have come in broadly in line with expectations — M2 8.3% vs. 8.1%, total social financing +1.92trn vs. +2.00trn median forecast and new loan growth +1.50trn vs +1.41bn survey — there are a number of interesting developments worth noting.
February credit growth inevitably slowed from January due to the Chinese New Year (CNY) holiday. But despite that the figures look pretty robust, particularly new loans, which came in at CNY1,360bn, well above median expectations of CNY950bn. That left total social financing growth at CNY1,710bn, more than double the level we saw last year. Jan-Feb cumulatively is up 16.1% from where it was in 2020 and most of this looks to be private sector driven with local government bond issuance down yoy.
January’s Chinese credit numbers were rather robust and some way ahead of expectations. But this is the pre-Chinese New Year period where things can be a little less predictable and should be really taken together with February’s readings. And then we’ll have the added problems of adjusting for the impact of Covid last year.
The ECB’s fingerprints remain all over the Eurozone money supply and credit numbers, with M3 hitting 11% yoy in November, the strongest reading we’ve seen thus far. This continues to be propelled by M1 which is up 14.2% yoy, overnight deposits up €1.053trn year-to-date. We’ve also hit something of a milestone with overall M3 now back at pre-GFC/EZ debt crisis trend levels.
Chinese credit growth rebounded after the weaker October numbers. Yuan loans came in at CHY1,430bn while total social financing hit CNY2,130bn. Money supply also ticked up a touch, M3 at 10.7% from 10.5%. Although outstanding loan growth eased a touch to 12.8% from 12.9% the monthly rise in TSF still exceeds the increase we saw last year, maintaining the leveraging trend we’ve seen since Covid hit. Indeed, ytd overall debt measured by the data has risen by 26% of GDP to 280%.
Chinese credit growth might look to have eased back in October, with Total Social Financing coming in at CNY1,420bn versus CNY3,480bn in the prior month and new yuan loans a modest CNY689.8bn versus CNY1,900bn in September, but October is typically the weakest month of the year for credit extension. Compared to a year ago credit growth was significantly up
Another strong credit number, Chinese total social financing (TSF) rising CNY3.48trn in September (mkt 3.15trn) while new yuan loans grew CNY1.9trn (est. 1.7trn). That leaves overall credit growth steady at +13% yoy. But that understates this impact. Indeed, on a 12m rolling basis credit issuance is up 37.8% or 30.4% excluding shadow banking. This is piling on more leverage to an over-leveraged economy, TSF stock now above 280% of GDP and growing fast, amplified by the GDP hit from Covid.
July credit data showed a deceleration of flow month on month, RMB loans issued dropping to RMB1,020bn from 1,903bn the prior month while total social financing came in at RMB1,690bn (RMB3,432bn prev). Credit flow remains strong compared to last year but with real economic activity picking up clearly the authorities have stepped back from the credit driven boost delivered over the past few months.
While credit extension matched consensus estimates in June the overall picture is still strong. New loans growth is running at +13.2% y/y, well in excess of the current rate of nominal GDP growth, while the total social financing figures hit CNY3.42trn, underpinned by rising local government bond financing, which lurks in the “other” category. Year-to-date total social financing is now at 80% of the full-year 2019 numbers,
Chinese credit expansion continues at pace, total social financing hitting CHY3.19trn in May up from CNY1.71trn a year earlier. The jump has been predominately driven by the ‘other’ section which is largely local government bond financing, which suggests the authorities have reverted to traditional investment driven support to support the Covid-economy.
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.
Chinese January credit data came in quite a bit stronger than expected, amid firm new loan growth and local government spending, which contributed to significantly a higher overall total social financing number (CNY5.7trn vs. the CNY4.3trn consensus). Chinese New Year fell earlier this year, but it’s not clear if that accounts for the strong outcome.
China December money supply ticked up, reflecting easier financial conditions. We also saw solid growth in total social financing, which came in ahead of expectations. The authorities have been keen to avoid an overt debt splurge, trying to generate more targeted easing, particularly focusing on transmission to SMEs in the private sector. These numbers suggest this has been a partial success...
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.