Independent Strategy

Tags: Money Supply

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.

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.

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.

In the Media