Global money signal still positive

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.

By InvestSMART · 16 Mar 2015

By InvestSMART ·
16 Mar 2015

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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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Frequently Asked Questions about this Article…

What does the rise in global real narrow money growth mean for everyday investors?

The rise in global real narrow money growth suggests positive economic prospects for the second half of the year. For everyday investors, this could mean potential opportunities for growth in their investment portfolios as economic conditions improve.

How does the US dollar impact global liquidity conditions?

Contrary to some claims, a strong US dollar does not necessarily tighten global liquidity conditions. In fact, recent data shows that global real narrow money growth has increased, indicating that liquidity conditions may be more favorable than expected.

Why is the G7 experiencing a surge in real money growth?

The G7 is experiencing a surge in real money growth primarily due to the United States. This increase is driven by faster nominal expansion, which suggests a robust economic environment in these developed economies.

What factors contributed to the increase in global real money growth in February?

The increase in global real money growth in February was due to faster nominal expansion, as opposed to the previous months where it was driven by a fall in inflation. This indicates a strengthening economic environment.

How are emerging markets like China and India performing in terms of real money growth?

In emerging markets, real money is expanding moderately in China and India. However, overall growth in the emerging E7 has been held back by contractions in Russia and Brazil.

What is the significance of the G7/E7 gap in real money growth?

The G7/E7 gap in real money growth has reached its highest level since January 2012. This indicates a divergence in economic conditions, with the G7 experiencing stronger growth compared to the emerging E7 economies.

Which countries are showing the strongest real money growth recently?

Recently, Mexico and Korea have shown the strongest real money growth among the countries tracked. This suggests that these economies may be experiencing favorable economic conditions.

When will the Eurozone's February monetary data be released?

The Eurozone's February monetary data is scheduled to be released on March 26. This data will provide further insights into the region's economic conditions and real money growth.