Blog Profile / Money Moves Markets

Filed Under:Business & Finance / Investing
Posts on Regator:1050
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Archived Since:July 5, 2011

Blog Post Archive

Euroland economic news softening on schedule

Previous posts (e.g. here) argued that the Euroland economy would slow from around spring 2018. Weaker February PMI results are consistent with this forecast. As usual at economic momentum peaks, the consensus is likely to emphasise the still-strong level of survey indicators, playing down the change of direction. Show More Summary

Will global money trends stabilise soon?

The global real money measure tracked here appears to have slowed further in January, reinforcing the expectation of a significant loss of economic momentum later in 2018. The US, China, Japan, Brazil and India have released January monetary data, together accounting for two-thirds of our G7 plus E7 aggregate. Show More Summary

Chinese money trends flashing danger

Chinese data for January / February can be distorted by New Year timing effects. With this caveat, January money numbers appear notably weak, reinforcing the expectation here of a significant economic slowdown later in 2018. A negative...Show More Summary

UK MPC hawkish shift at odds with money trends

Last week’s UK Inflation Reportsignalled that the MPC intends to raise rates again in May if the economy evolves in line with its forecast. Monetary trends suggest that the Committee should proceed with caution.The MPC’s new-found hawkishness partly reflects its repeated underestimation of inflation outturns. Show More Summary

Is the liquidity backdrop for markets now negative?

The consensus narrative is that recent equity market declines reflect worries that rising inflation will force central banks to accelerate policy tightening. An alternative possibility is that global monetary conditions are already restrictive...Show More Summary

Global leading indicator confirming monetary warning signal

Incoming evidence is consistent with the view here that the global economy will slow significantly later in 2018. As suggested by earlier partial data, six-month growth of real narrow money in the G7 and seven large emerging economies fell to its lowest level since 2009 in December. Show More Summary

Global money trends still weakening

Global policy-makers are trumpeting “synchronised” economic growth. They should, instead, be worrying about synchronised monetary weakness, which is ringing alarm bells about economic prospects for later in 2018. Euroland money numbers for December released today were soft. Show More Summary

Is the UK labour market overheating?

Rising UK labour shortages seem to be feeding through to faster pay growth, supporting the arguments of MPC hawks such as Michael Saunders and suggesting shortening odds of an early further increase in interest rates. The number of full-time employees rose by a very strong 0.9% in the three months to November, to stand 2.3% higher than a year before. Show More Summary

UK public finances still surprising positively

UK public sector net borrowing is on course to undershoot the Office for Budget Responsibility’s £49.9 billion forecast for 2017-18, partly reflecting resilient tax receipts – consistent with the assessment here that economic growthShow More Summary

Chinese money trends signalling weaker outlook

Chinese economic growth remained solid in late 2017, as had been suggested by narrow money trends through the summer. The latest narrow money numbers, however, were notably weaker – barring a swift reversal, the suggestion is that economic...Show More Summary

A "monetarist" perspective on current equity markets

2017 was a bumper year for global markets because economic growth strengthened, core consumer price inflation flatlined and the monetary environment remained accommodative despite Federal Reserve policy tightening. Prospects for 2018...Show More Summary

UK data revisions positive, money trends stable

The Office for National Statistics presented a pre-Christmas gift to economic optimists by upgrading GDP numbers for 2016-17 while indicating that the balance of recent growth has been more favourable than previously reported. Current...Show More Summary

Is the consensus too optimistic about 2018 Euroland growth?

Euroland monetary trends have cooled. Six-month growth of real narrow money, as measured by non-financial M1 deflated by consumer prices, fell to its lowest level since 2014 in November – see first chart. The decline from a most recent...Show More Summary

Global growth near peak - are US tax cuts well-timed?

The favoured scenario for 2018 here is that global economic growth will moderate from around March while core consumer price inflation will rise through the year, causing major central banks – with the possible exception of the PBoC – to remain on a tightening tack. Show More Summary

Chinese money trends suggesting stable outlook

Chinese monetary and regulatory policy tightening in 2017 has raised fears of a sharp economic slowdown in 2018. Monetary trends do not currently support such worries. Narrow and broad money measures are rising at a pace consistent with moderate nominal economic expansion. Show More Summary

Simple forecasting rule suggesting stable UK growth

A simple forecasting rule-of-thumb based on money growth and share prices is giving a neutral message for 2018 economic prospects. The forecasting rule classifies the outlook for GDP growth in the following calendar year as good, bad or average depending on whether December levels of real (i.e. Show More Summary

Euro at risk from distortionary ECB policy

ECB monetary policy is grotesquely misaligned with economic conditions. Monetary laxity threatens to reverse a recent strengthening of the balance of payments basic balance, suggesting euro weakness. GDP grew by 2.6% in the year to the third quarter, mainly reflecting strength in domestic final demand, which rose by 2.3% – see first chart. Show More Summary

Global money trends signalling economic growth peak

The consensus view is that 2018 will be another year of strong and broadly-based global economic growth. Monetary trends and cycle analysis, by contrast, suggest that early robust momentum will fade as the year progresses. As indicated by earlier partial data, global (i.e. Show More Summary

Euroland / UK monetary update - messages unchanged

Euroland monetary trends have cooled slightly, suggesting that GDP growth will moderate in the first half of 2018. UK trends have stabilised after weakness earlier in 2017, consistent with GDP growth continuing at around its recent pace. As usual, the focus here is on non-financial monetary aggregates, i.e. Show More Summary

Santa Hammond throws caution to the wind

The Chancellor belied his reputation as a fiscal conservative by announcing a sizeable easing relative to previous plans, allocating the extra cash across a range of supposedly populist measures. Fiscal policy will be 1.2% of GDP looser...Show More Summary

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