Search Results: 185
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: firstname.lastname@example.org.
185 matches for " m1":
The headline in yesterday's EZ money supply report gave the illusion that monetary conditions are stable, but the details tell a different story. M3 growth accelerated marginally to 5.0% year-over-year in June, from 4.9%, but momentum in narrow money fell further. M1 growth slowed to 8.5% year-over-year, from 9.0% in May due to a fall in overnight deposits and currency in circulation.
Money supply data continue to send a bullish message on the euro area economy. Broad money growth was unchanged at 5.0% year-over-year in June, but M1 growth surged to 11.8%, from 11.2% in May. Combined with low inflation, real M1--the best leading indicator in the Eurozone--indicates a surge in GDP growth on par with previous record business cycle upturns in 1999, 2005-06 and 2009-10.
Money supply growth in the Eurozone rebounded slightly last month, reversing some of the weakness at the start of the year.
Economic data in the Eurozone are sending an increasingly upbeat message on the economy. Yesterday saw a barrage of numbers, but the most startling of them was the continued acceleration in the money supply.
Yesterday's economic data in the Eurozone were soft.
China's monetary conditions remain tight, pointing to a substantial downtrend in GDP growth this year and next.
Yesterday's data in the EZ provided a little more evidence on what happened in Q1.
Monetary conditions in the Eurozone continue to send a bullish message on GDP growth, and indicate an ongoing, but slow, improvement in credit growth. Broad money growth--M3--was unchanged at 4.9% year-over-year in September, after a trivial 0.1% upward revision of last month's data. The increase continues to be driven by surging narrow money rising 11.7% in September from 11.5% in August, boosted by overnight deposit growth offsetting a slight decline in currency in circulation.
As we go to press, it appears that politicians in Italy have agreed on a 2019 budget deficit of 2.4% of GDP.
Yesterday's economic numbers in the Eurozone were mixed, but we are inclined to see them through rose-tinted glasses.
The business cycle upturn in the Eurozone likely will remain resilient in the first half of 2017. Friday's money supply data showed that headline M3 growth increased to 5.0% in December, from 4.9% in November.
A bullish EZ money supply report was the key highlight while we were away over the holidays. M3 growth in the euro area accelerated to 4.8% year-over-year in November from 4.4% in October.
Yesterday's EZ money supply data confirmed that liquidity conditions in the private sector improved in Q3, despite the dip in the headline.
In recent Monitors--see here and here--we have made a case for decent growth in the EZ's largest economies in the second half of the year, though we remain confident that full-year growth will be a good deal slower, about 2.0%, than the 2.5% in 2017.
Headline money supply growth in the Eurozone accelerated further at the start of Q2.
We held our breath this month.
Money supply growth in the Eurozone quickened last month, by 0.3 percentage points to 3.9% year- over-year, but the details were less upbeat.
We have been asked recently why we rarely talk about the signal from the U.S. money supply numbers, in contrast to the emphasis we give to real M1 growth in our forecasts for economic growth in both the Eurozone and China.
Money supply dynamics in the Eurozone continue to signal a solid outlook for the economy. Headline M3 growth eased marginally to 4.9% year-over-year in January, from 5.0% in December; the dip was due to slowing narrow money growth, falling to 8.4% from 8.8% the month before. The details of the M1 data, however, showed that the headline chiefly was hit by slowing growth in deposits by insurance and pension funds.
A PBoC rate cut is looking increasingly likely. Policy is already on the loosest setting possible without cutting rates, but the Bank has little to show for its marginal approach to easing, with M1 growth still languishing.
Chinese M1 growth has slowed sharply in the past year from the 25% rates prevailing in the first half of last year. Growth appeared to rebound in July to 15.3% year-over-year, from 15.0% in June. But the rebound looks erratic. Instead, growth has probably slowed slightly less sharply in 2017 than the official data suggest, but the downtrend continues.
Data released over the holidays suggest that money supply dynamics in the Eurozone remain solid, but also that growth is no longer accelerating. M3 growth slipped to 5.1% year-over-year in November from 5.3% in October, partly due to a sharp monthly fall in the stock of repurchase agreements. Momentum in narrow money, however, also dipped. M1 growth slowed to 11.2% year-over-year from 11.8% in October, mainly due to a modest fall in overnight deposit growth.
Yesterday's money supply data in the Eurozone were solid across the board. Growth in headline M3 rose to 5.1% year-over-year in August, up from a 4.9% increase in July. A rebound in narrow money growth was the key driver of the gain, with seasonally- and calendar-adjusted M1 rising 8.9% year-over-year, up from July's 8.4%.
Monetary policy loosening over the last year implies that China's M1 growth already should be picking up.
Headwinds from global growth fears have weighed on Eurozone equities in recent months, leaving the benchmark MSCI EU ex-UK index with a paltry year-to-date return ex-dividends of 1.7%. We think bravery will be rewarded, though, and see strong performance in the next six months. Equities in Europe do best when excess liquidity --M1 growth in excess of inflation and nominal GDP growth--is high.
Money supply data in the euro area are sending an increasingly upbeat signal on the economy. The increase in narrow money growth is the key variable here, now pointing to a noticeable acceleration in GDP growth later this year. Allowing for the usual lags between upturns in M1 and the economy, we should start to see this in the second and third quarter.
All the evidence indicates that growth in Eurozone consumers' spending is slowing. We think data today will show that the advance GfK consumer sentiment index in Germany was unchanged at 9.5 in April, but the headline index does not correlate well with spending. The "business expectations" index is better, and while it likely will increase slightly, our first chart shows that it continues to signal a slowdown in consumers' spending growth.
The tailwinds that have propelled Eurozone equities higher since the middle of last year remain place, in principle. In the economy, political uncertainty in the euro area has turned into an opportunity for further integration and reforms, and cyclical momentum in has picked up. And closer to the ground, fundamentals also have improved.
The PBoC doesn't publicly schedule its meetings, but in recent years has tended to make moves after Fed decisions.
The prospect of fiscal stimulus in the euro area-- ostensibly to "help" the ECB reach its inflation target-- remains a hot topic for investors and economists.
Yesterday's national surveys in the EZ confirmed the downbeat message from the PMIs and consumer sentiment data earlier this week.
Today's economic calendar in the Eurozone is filled to the rafters.
The slowdown in the EZ economy is well publicised.
Today's ECB meeting will mainly be a victory lap for Mr. Draghi--it is the president's last meeting before Ms. Lagarde takes over--rather than the scene of any major new policy decisions.
We're breaking protocol this week by delivering our preview for Thursday's ECB meeting in today's Monitor.
The ECB made no changes to policy yesterday, leaving its key refinancing and deposit rates unchanged, at 0.00% and -0.5%, and confirmed that it will restart QE in November at €20B per month.
Mr. Draghi used his introductory statement at the ECON--EU Economic and Monetary Affairs Committee-- hearing last week to assure investors that the central bank is vigilant to downside risks. The president noted the governing council "would not hesitate to act" if it deems growth and inflation to be undershooting expectations. Market volatility has increased the ECB's worries, but economic data continue to tell a story of a firm business cycle upturn.
Survey data in Germany showed few signs of picking up from their depressed level at the start of Q4.
Yesterday's January EZ money supply data offered support for investors betting on a further dovish shift by the ECB at next month's meeting.
Chinese GDP numbers always require a great deal of detective work, and yesterday's needed more than the norm; multiple rounds of revisions needed decoding.
Monetary dynamics in the Eurozone were virtually unchanged last month. M3 growth rose trivially to 5.0% year-over-year in March from a revised 4.9% in February. It was lifted by stronger growth in medium-term deposits and issuance of short-term debt.
okThe weekend's election result in Spain provided relief for investors anxiously looking for another "surprise." Exit polls on Sunday showed a big majority for the anti-establishment party Podemos, but in the end Spanish voters opted for safety. The incumbent Partido Popular, PP, was the election's big winner compared with the elections six months ago, gaining 15 seats.
Yesterday's money supply data gave some respite after last month's disappointing slowdown. Broad money growth--M3--rose to 5.0% year-over-year, from 4.7% in December, but the details were less encouraging. The rebound was solely due slower declines in medium-term deposits, short-term debt issuance, and repurchase agreements.
Money supply data are sending an increasingly contrarian, and bullish, signal for the euro area economy.
Broadly speaking, yesterday's headline EZ survey data recounted the same story they've told all year; namely that manufacturing is suffering amid resilience in services.
The Spanish economy has been punching above its weight in the current business cycle. Real GDP growth has trended at about 0.8% quarter-on-quarter since 2015, far outpacing the other major EZ economies.
The Argentinian government and the IMF have finally reached a new agreement to "strengthen the 36-month Stand-By Program approved on June 20".
Eurozone inflation pressures snapped back in April. Friday's advance report showed that headline inflation rose to 1.9% year-over-year, from 1.5% in March, lifted by a jump in the cor e rate to 1.2% from 0.7% the month before.
We doubt that this week will see the MPC joining the list of other major central banks that have abandoned plans to raise interest rates this year.
Mexico's election results are not available as we go to press, but we're expecting a comfortable win for the left-wing populist candidate, AMLO.
China's property market continued to slow in August, with prices rising by just 0.2% month-on- month seasonally adjusted, half the July pace.
The economic calendar in the euro area was relatively quiet over Christmas, and broadly conformed to our expectations.
We suspect that euro area investors have one question on their mind as we step into 2019.
The Bank of Korea yesterday laid out its conditions for following July's rate cut with another.
Chile's Q4 GDP report, released yesterday, confirmed that the economy accelerated at the end of last year, supported by rising capex and solid consumption.
This year has been sobering for Eurozone equity investors.
For countries with developed non-banking funding channels, narrow money isn't necessarily a good predictor of GDP growth.
The Eurozone's external surplus recovered a bit of ground mid-way through the third quarter.
While we were out, the key economic news in the Eurozone was mostly positive. The main upside surprise came from the advance Q2 German GDP report, which showed that real GDP rose 0.4% quarter-on-quarter, slowing from the 0.7% jump in the first quarter.
Industrial sector activity in the euro area was broadly stable at the beginning of the third quarter, despite the headline dip in the July manufacturing PMI. The Eurozone index fell to 52.0 in July, from 52.8 in June, but if it holds at this level it will be unchanged in Q3 compared with the second quarter.
We continue to see signs of a strengthening upturn in Eurozone construction. Output in construction rose 0.3% month-to-month in April, pushing the year-over-year rate down to 3.2%, from an upwardly revised 3.8% in March.
Data today will show that the EZ construction sector finished 2017 on a decent note.
China's current account surplus grew further in the final quarter of 2018, more than doubling to $54.6B, from $23.3B in Q3.
Sentiment in the French business sector ended this year on a high. The headline manufacturing index fell slightly to 112 in December, from an upwardly-revised 113 in November, but the aggregate sentiment gauge edged higher to a new cycle high of 112.
Chinese headline industrial profits data show that growth slowed to just 4.1% year-over-year in September, from 9.2% in August.
Yesterday's final manufacturing PMIs for October were grim, but they told investors nothing they don't already know.
Yesterday's final PMI data for February confirmed the story from the advance reports.
The PBoC finally moved yesterday, cutting its one-year MLF rate by 5bp to 3.25%, whilst replacing around RMB 400B of maturing loans.
Japan's monetary base growth showed further signs of stabilisation in May, at 8.1% year-over-year, edging up trivially from 7.8% in April.
Final October PMI data today will confirm the Eurozone's recovery remains on track. We think the composite PMI rose to 54.0 from 53.6 in September, in line with the consensus and initial estimate. Data on Monday showed that manufacturing performed better than expected in October, and the composite index likely will enjoy a further boost from solid services. The PMIs currently point to a trend in GDP growth of 0.4%-to-0.5% quarter-on-quarter, the strongest performance since the last recession.
Korean hard data for December, so far, leave the door ajar for the possibility that the Bank of Korea will roll back its November hike sooner than we expect.
Japan's jobless rate inched up to 2.5% in January, from 2.4% in December.
We have spent the past few weeks shifting our story on the EZ economy from one focused on slowing growth and downside risks to a more balanced outlook. It seems that markets are starting to agree with us.
Judging by interactions with readers in the past few weeks, fiscal policy is one of the most important topics for EZ investors as we move into the final stretch of the year.
Yesterday's economic reports in the Eurozone were mostly positive.
China's trade numbers for July surprised to the upside, with both exports and imports faring better than consensus forecasts in year-over-year terms.
Yesterday's headline economic data in Germany were decent enough. Industrial output edged higher by 0.3% month-to-month in May, lifted primarily by rising production of capital and consumer goods.
The trade-off between the timeliness and accuracy of the data is fundamental to macroeconomic analysis. Coincident data such as GDP, industrial production and retail sales are the most direct measures of economic activity, but their first estimates don't always tell the full story.
China was in lockdown ahead of the 70th Anniversary last week, as is typical around important political events.
Manufacturers in Germany endured another miserable quarter in Q3.
The Monetary Policy Committee of the Reserve Bank of India shocked most forecasters yesterday, including us, with a 4-to-2 majority voting in favour of a 25-basis point rate cut.
Economic growth in Chile slowed in Q1, despite a relatively strong end to the quarter, and the chances of an accelerating recovery remains disappointingly low, due to both global and domestic headwinds.
Money supply growth in the euro area eased further towards the end of Q4.
The Caixin manufacturing PMI for January was grim, indicating that China's start to the year wasn't as benign as the official surveys suggested.
The Eurozone manufacturing sector finished 2017 on a strong note. The headline PMI increased to a cyclical high of 60.6 in December, from 60.1 in November, in line with the initial estimate.
The sharp fall in China's manufacturing PMI in May makes clear that its recovery is nowhere near secured.
Last week's advance EZ GDP data for the first quarter suggest the economy shrugged off the volatility in financial markets. Eurostat's first estimate indicates that real GDP in the euro area rose 0.6% quarter-on-quarter in Q1, up from 0.3% in Q4, and above the consensus, 0.4%.
Headline money supply growth in the Eurozone has averaged 5% year-over-year since the beginning of 2015; yesterday's October data did not change that story.
Data yesterday revealed that headline inflation in Germany was unchanged in March at 1.5%, thanks mainly to higher energy inflation, which offset a dip in food inflation.
In the last few weeks markets have been treated to the news that euro area industrial production crashed towards the end of Q4, warning that GDP growth failed to rebound at the end of 2018 from an already weak Q3.
Money supply dynamics in the Eurozone were broadly stable last month. M3 rose 5.0% year-over-year in May, accelerating slightly from a 4.9% increase in April, in line with the trend since the middle of 2015.
Negotiations between Greece and its creditors collapsed over the weekend, greatly increasing the risk of a Grexit. The decision by Syriza to call a referendum on the bailout proposal next weekend, initially advocating rejection, forced the Eurogroup to abandon negotiations and focus on "damage control." Hope of a final retreat from the brink rests with the Greek parliament deciding not to hold the referendum, and accepting the proposal presented on Friday.
While we were enjoying a rare sunny bank holiday in the U.K., data showed that Eurozone money supply growth slowed at the start of Q3. Broad money growth--M3--fell to a 10-month low of 4.5% year-over- year in July, from 5.0% in August.
Price action in Italian bonds went from hairy to scary yesterday as two-year yields jumped to just under 3.0%.
Yesterday's data kicked off the release of Eurozone Q3 growth numbers with a robust Spanish headline. Real GDP in Spain rose 0.8% quarter-on-quarter, slowing slightly from 0.9% in Q2, and le aving the year-over-year rate unchanged at 3.1%.
Yesterday's barrage of economic data in the Eurozone offered a good snapshot of the grand narrative.
Following the much-anticipated meeting between Presidents Xi and Trump over the weekend, the U.S. will now leave existing tariffs on $200B of Chinese goods at 10%, rather than increasing the rate to 25% in January, as previously slated.
Defaults by Chinese companies have been on the rise lately. Most recently, China Energy, an oil and gas producer with $1.8B of offshore notes outstanding, missed a bond payment earlier this week. We've highlighted the likelihood of a rise in defaults this year, for three main reasons.
China's residential property market surprised again in August, with prices popping by 1.5% month- on-month, faster than the 1.2% rise in July, and the biggest increase since the 2016 boomlet.
Bullish money supply data last week added to the evidence that the Eurozone's business cycle is strengthening. Broad money growth--M3--rose to 5.3% year-over-year in October from 4.9% in September. Most of the increase came from a surge in short-term debt issuance, rising 8.4% year-over-year, following an inexplicable 1.4% fall in September.
French consumer confidence and consumption have been among the main bright spots in the euro area economy so far this year.
Yesterday's money supply data in the Eurozone were solid across the board.
The beleaguered EZ car sector finally enjoyed some relief at the end of Q3, though base effects were the major driver of yesterday's strong headline.
GDP growth in Japan surprised to the upside in the second quarter, although the preliminary headline arguably flattered the economy's actual performance.
The political situation in Spain remains an odd example of how complete gridlock can be a source of relative stability.
China's money and credit numbers were once again unspectacular in August. M2 growth edged up to 8.2% year-over-year, from 8.1% in July.
Next week is a big one for China. The five yearly Party Congress opens on Wednesday, and on Thursday, the monthly raft of activity data is published, along with Q3 GDP.
We have downgraded our 2019 and 2020 China GDP forecasts on previous occasions because monetary conditions have been surprisingly unresponsive to lower short-term rates.
Financial assets of all stripes are, by most metrics, expensive as we head into year-end, but for some markets, valuations matter less than in others. The market for non-financial corporate bonds in the euro area is a case in point.
Our colleagues have been telling some unpleasant stories recently.
Barring a gigantic shock from the Fed this week--we expect a 25bp hike--Eurozone equities will end the year with a solid return for investors, who have been overweight. Total return of the MSCI EU ex-UK should come in around 10%, which compares to a likely flat return for the MSCI World, reflecting the boost from the ECB's QE driving out performance. Our first chart shows the index has been mainly lifted by consumer sector, healthcare and IT stocks, comfortably making up for weakness in materials and energy. The year has been a story of two halves, however, and global headwinds have intensified since the summer, partly offsetting the surge in the Q1 as markets celebrated the arrival of QE and negative interest rates.
Credit to the Chinese authorities for sticking it out with the marginal approach to easing for so long... at least two quarters.
Friday's data added further colour to the September CPI data for the Eurozone.
Manufacturing in the EZ was held above water by Ireland at the end of Q3.
Last week's evidence of still-strong wage growth in the EZ at the start of the year almost surely has gone unnoticed as markets focus on the prospect of rate cuts, not to mention more QE, by the ECB.
China's headline trade numbers appear to paint a picture of an economy in rude health but scratch the surface and the story is quite different. The trade surplus rose to$42.8B in June from $40.8B in May, hitting consensus.
Chinese M2 growth was stable at 8.3% year- over-year in May, despite favorable base effects.
Central bankers globally are full of market- appeasing but conditional statements.
China's M2 growth stabilised in November, at 8.0% year-over-year, matching the October rate.
Official Chinese real GDP growth likely slipped to 6.3% year-over-year in Q1, the lowest on record, from 6.4% in Q4, which matched the trough in the Great Financial Crisis.
Yesterday's economic data in Germany were stellar, but base effects mean that the story for Q4 as a whole is less upbeat.
China's official and Caixin manufacturing PMIs have diverged in the last couple of months.
The more headline hard data we see in the Eurozone, the more we are getting the impression that 2019 is the year of stabilisation, rather than a precursor to recession.
Investors were presented with a barrage of mixed EZ economic data on Friday, fighting for attention amid markets celebrating the arrival of negative interest rates in Japan. Advance Eurozone CPI data gave some respite to the ECB, with inflation rising to 0.4% year-over-year in January from 0.2% in December.
Yesterday's money supply data in the Eurozone were alarmingly poor.
We think Japanese monetary policy easing essentially is tapped out, both theoretically and by political constraints.
China's money and credit numbers for April were a mixed bag. M2 growth merely inched down, to 8.5% year-over-year, from 8.6% in March, keeping its gradual uptrend intact.
Today's industrial production data in the Eurozone will extend the run of soft headlines at the start of the year.
The escalation in the U.S.-Chinese trade wars has understandably pushed EZ economic data firmly into the background while we have been resting on the beach.
Yesterday's economic reports in the Eurozone were ugly.
Friday's data force us to walk back our recession call for Germany. The seasonally adjusted trade surplus rose in September, to €19.2B from €18.7B in August, lifted by a 1.5% month-to-month jump in exports, and the previous months' numbers were revised up significantly.
Gloom and uncertainty are spreading across the global economy as we head into the final stretch of the year.
China's trade surplus bounced back strongly in May, rising to $40.1B on our adjustment, from $35.7B previously.
Yesterday's data showed that growth in the EZ slowed in the second quarter.
China's M2 growth slowed to 8.2% year-over-year in August, from 8.5% in July
China's GDP data--to be published on Monday-- are likely to report that growth slowed to 1.4% quarter-on-quarter in Q4, from 1.6% in Q3. A 1.4% increase would match the series low of Q1 2016.
The outlook for growth in the EZ economy is currently both stable and relatively uncomplicated, at least based on the most widely-watched leading indicators.
The cyclical upturn in the euro area's economy is going from strength to strength. Yesterday's second Q2 GDP estimate confirmed growth at 0.6% quarter- on-quarter, marginally stronger than the 0.5% rise in the first quarter.
Last week's policy announcement by the ECB and Mr. Draghi's plea to EU politicians to deliver a fiscal boost, indicate that we're living in extraordinary economic times.
Yesterday's final inflation data in France for September were misleadingly soft.
China's official real GDP growth is absurdly stable, but the risks in Q3 are tilted to the downside.
Chinese prices largely moved in line with our expectations in September, according to yesterday's data.
Yesterday's second estimate of Q4 Eurozone GDP confirmed the upbeat story from the advance report, despite the dip in headline growth.
Our first impression of the proposed Brexit deal between the EU and the U.K. is that it is sufficiently opaque for both sides to claim that they have stuck to their guns, even if in reality, they have both made concessions.
China's monetary and credit data--released yesterday, two days behind schedule--suggest that monetary conditions are loosening at the margin, while credit conditions have remained stable, but easier than in the first half.
"Disappointing" is probably the word that most EZ equity investors would use to describe their market so far this year.
Japan's inflation target came under heavy fire yesterday, as Finance Minister Taro Aso suggested that "things will go wrong if you focus too much on 2%."
Investors have endured a severe test of their resolve in the last few months. Global equity markets have sunk more than 10%, eclipsing the previous low in September, and credit spreads have widened. The bears have predictably pounced and, as if the torrid price action hasn't been enough, media headlines have been littered with advice to "sell everything" and warnings of a 75% fall in U.S. and global equities. When "price is news" we recognise that views from well-meaning economists--often using lagging and revised economic data to describe the world--are of little value.
Data over the past week give a near-complete picture of how India's economy fared in the fourth quarter.
China's official real GDP growth likely slowed to 6.0% year-over-year in Q3, from 6.2% in Q2.
Take China's data dump last Friday with a pinch of salt, as Chinese New Year--CNY-- effects look to have distorted January's money and price data.
Yesterday's second Q3 GDP estimate confirmed that the EZ economy expanded by 0.2% quarter-on- quarter in Q3, the same pace as in Q2, leaving the year-over-year rate unchanged at 1.2%.
Yesterday's second batch of Q3 GDP data in the euro area provided further evidence of a strong and stable cyclical upturn in the economy.
Following Chinese retaliation against new U.S. tariffs last week, the U.S. responded last night, as promised, setting in train the process to slap tariffs on the remaining approximately $300B of imports from China.
Based on key economic indicators, the Eurozone economy is doing splendidly, relative to its performance in recent years. Real GDP has been growing at 1.6%-to-1.7% year-over-year since the first quarter of last year, bank credit has expanded, and the unemployment rate is declining.
China's December foreign trade numbers were unpleasant, with both exports and imports falling year-over-year, after rising, albeit slowly in November.
In our Monitor of January 10, we argued that the market turmoil in Q4 was largely driven by the U.S.- China trade war, and that a resolution--which we expect by the spring, at the latest--would trigger a substantial easing of financial conditions.
Yesterday's second estimate of GDP confirmed that Eurozone growth slowed significantly in Q3.
Few Eurozone investors are going blindly to accept the rosy premise of last week's relief rally in equities that both a Brexit and a U.S-China trade deal are now, suddenly, and miraculously, within touching distance. But they're allowed to hope, nonetheless.
China's money and credit data released last Friday reaffirm our impression that the tightening has gone too far.
The second round of EZ GDP data on Friday confirmed the resilience of cyclical upturn. Real GDP in the euro area rose 0.5% quarter-on-quarter in Q1, up from 0.3% in Q4, and the fastest pace since the first quarter of last year. But the headline was slightly lower than the initial estimate, 0.6%, and consistent with our forecast before Friday's data.
The Chinese authorities have been out in force in the last few days, aiming to reassure markets and the populace that they are ready and able to support the economy, after abysmal trade data on Monday.
Japanese M2 growth slowed sharply in December, to 3.6% year-over-year, from 4.0% in November, with M3 growth weakening similarly. It is tempting to ask if the BoJ's stealth taper finally is damaging broad money growth.
Yesterday's GDP reports confirmed that growth was stable at 0.3% quarter-on-quarter in the Eurozone, leaving the year-over-year rate unchanged at 1.5%. Rebounding growth outside Germany, which has been a main driver of EZ GDP growth in this cycle, was the key story.
The holiday effects are at it again. C hina's trade balance dropped to a deficit of $5.0B in March, from a surplus of $33.5B in February, confounding expectations for a surplus of $27.5B.
In recent Monitors, we have highlighted the upturn in Q4 survey data pointing to a strong end of the year for the EZ economy. This story has not changed, but yesterday's money supply data tell a story of downside risks.
Momentum in the euro area's money supply slowed last month. M3 growth dipped to 4.7% year-over-year in February, from a downwardly-revised 4.8% in January. The headline was mainly constrained by the broad money components. The stock of repurchase agreements slumped 24.3% year-over-year and growth in money market fund shares also slowed sharply.
Survey and money supply data remain consistent with an improving Eurozone economy. Yesterday's EC sentiment index fell to 103.7 in April, from 103.9 in March, due to weakness in France and Germany, but it is consistent with GDP growth of about 0.4% quarter-on-quarter in Q2.
The prospect of a Greek parliamentary election on January 25th, following Prime Minister Samaras' failure to secure support for his presidential candidate, weighed on Eurozone assets over the holidays. The looming political chaos in Greece will increase market volatility in the first quarter, but it is too early to panic.
Money supply data in the euro point to a cyclical peak in GDP growth this year. Headline M3 growth fell to 4.8% year-over-year in July, from 5.0% in June, chiefly due to a slowdown in narrow money. M1 growth declined to 8.4%, from 8.7%, as a result of weaker momentum in overnight deposits and currency in circulation.
A strong December didn't change the story of another year of Eurozone equity underperformance in 2016. The total return of the MSCI EU, ex-UK, last year was a paltry 3.5%, compared to 11.6% and 10.6% for the S&P 500 and MSCI EM respectively. In principle, the conditions are in place for a reversal in this sluggish performance are present. Equities in the euro area do best when excess liquidity--defined as M1 growth less GDP growth and inflation--is rising.
Real M1 growth is slowing, and financial conditions are beginning to tighten in the Eurozone, but shortleading indicators continue to signal firm momentum in the economy.
Strong real M1 growth suggests the cyclical recovery is in good shape. But recent economic data indicate GDP growth slowed in Q4, and survey evidence deteriorated in January. This slightly downbeat message, however, is a far cry from the horror story told by financial markets. The recent collapse in stock-to-bond returns extends the decline which began in Q2 last year, signalling the Eurozone is on the brink of recession.
Money supply data in the euro area disappointed yesterday. Growth in M3 fell to 4.6% year-over-year in April, from 5.0% in March, due to an accelerated fall in the pace of narrow money growth. M1 rose 9.7% year-over-year, down from 10.1% in March. It was hit by lower growth in both overnight deposits and currency in circulation.
Final Q2 GDP data yesterday indicate the euro area economy was stronger than initially estimated in the first half of the year. Real GDP rose 0.4% quarter-on-quarter in Q2, slightly higher than the initial estimate of 0.3, following an upwardly revised 0.5% increase in Q1. Upward revisions to GDP in Italy were the key driver of the more upbeat growth picture. The revisions mean that annualised Eurozone growth is now estimated at 1.8% in the first six months of the year, up from the previous 1.4%, consistent with the bullish message from real M1 growth and the composite PMI.
In one line: Robust, despite marginal dip in M1 growth.
Brace For Grim Q3 GDP Data In The Eurozone....But Don't Miss The Upturn In Real M1 Growth
In one line: Confidence to borrow is lacking, but M1 growth pick-up is a welcome sign.
Two fiscal deadlines are on the near-horizon.
Chief U.K. Economist Samuel Tombs on U.K. Retail Sales
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research