Independent Strategy

Tags: Credit

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.

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.

China

REPORT » 4th April, 2019 » The Iceman Cometh?

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.

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