Contrary to claims that a strong US dollar is tightening liquidity conditions, six-month growth of global* real narrow money appears to have risen further in February, suggesting solid second-half economic prospects.
The US, China, Japan, India and Brazil have released February monetary data, together accounting for about 60% of the aggregate tracked here. Assuming stable six-month changes elsewhere, the global measure should reach its highest level since December 2011 – see first chart.
The rise in global real money growth over October-January reflected an energy-driven fall in inflation. The February increase, by contrast, was due to faster nominal expansion – second chart.
Real money growth surged in the G7 but fell back in the emerging E7, pushing the G7 / E7 gap to its highest since January 2012 – third chart. The G7 rise was mainly due to the US – see previous post. Japanese real money growth firmed but continues to lag the Eurozone / US. February Eurozone data will be released on 26 March.
E7 growth has been held down by contractions in Russia and Brazil. Real money is expanding moderately in China and India. The strongest growth recently has been in Mexico and Korea – fourth chart.
*G7 plus emerging E7.
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