Global Money Supply – Some Recovery Afoot

Money event overview- Global money supply shows money supply in major money center countries is expanding. Money supply deflated for the impact of inflation is weaker and mixed contracting in Japan and in the United Kingdom along with credit in the EMU while real balances for the EMU and in the United States log positive growth is year-over-year in January. Inflation globally is over-target in the money center countries and areas where inflation of 2% is targeted.

The chart shows that money supply growth is steadily improving in nominal terms across countries, with the exception of Japan where M2-plus CD growth is gradually in a state of ongoing slowdown.

EMU In the European Monetary Union, nominal money growth has stepped up from 1.7% over three years, slowed to 1% over two years and accelerated to 3.3% over one year. Private credit growth has fallen from a 2.1% annual rate over three years, to 0.9% over two years and picked up to 2.1%, again, over one year. Real money balance growth in the EMU has progressed from -2.8% annual rate over three years to a -1.6% pace over two years to +0.8% over the last 12 months. Similarly, real credit to private residents has improved steadily but is still contracting by 0.4% over 12 months.

U.S., U.K., and Japan U.S. nominal money growth is gradually improving from an average of zero over three years to a pace of 3.9% over 12 months. Real balance growth in the U.S. also improves steadily from -4% over three years to +0.8% over 12 months. U.K. nominal money growth improves from 1.0% over three years to a pace of 2.7% over 12 months. U.K. real balances show monetary shrinkage, but the shrinkage is steadily lessening from -4.3% over three years to a pace of -0.8% over 12 months. Japan’s nominal monthly growth shows little variation, but it does gradually slow from 2.2% over three years to 1.3% over 12 months. Japanese real balance growth rates all are negative at -1.3% over three years, at -1.2% over two years and at a weaker -2.7% over 12 months. Japan’s inflation has recently picked up and after wondering if its inflation was real following a decade of deflation flirtation, Japan now has over-the-top inflation to deal with.

Inflation and other trends Inflation: Comparing year-on-year inflation rates in January 2025 to July 2024, U.S. inflation is a tick higher in January at 3% compared to 2.9% in July. In the EMU, the comparison the other way around with January HICP inflation at 2.5% compared to 2.6% in July 2024. U.K. inflation is at 3.9% in January, up solidly from 3.1% in July. The CPI in Japan is also up strongly at 4% in January compared to 2.7% in July 2024.

Inflation change trends- But there has been inflation progress as six-month changes in year-on-year inflation trends show U.S. PCE inflation is lower in six of the past seven months - January 2025 shows the first step up in this gauge for the U.S. The EMU HICP shows declines or flatness across all seven months. The U.K. shows inflation on this basis rising in each of the last four months; Japan shows it rising in each of the last three months.

IP and composite PMIs: Industrial production year-over-year is falling for all months in all four countries/regions for July 2024 though December 2024. However, the more sensitive and broader composite PMI gauges from S&P show year-on-year declines in January for the U.S., the U.K., and Japan against an increase for the EMU. And there are year-on-year increases reported in December and November for all the reporters in the table except the U.K.; it shows year-on-year declines from November 2024 through January 2025.

Older patterns are mixed but the overall picture generally shows more strength than IP data. There are 28 year-on-year comparisons January 2025 to July 2024 for four reporters and among those only 8 year-on-year reductions reported from composite PMI comparisons. The EMU reports increases for all months.

Summing up On balance, money growth is positive and rising except for Japan. Real money balances are stabilizing or close to stabilizing with modest ongoing weakness in Japan as the exception. Inflation is still broadly overshooting, and growth is mostly weak with still flattening industrial trends and uncertain overall results that remain largely positive. The question everyone is wondering about now is the impact of some significant reordering of U.S. priorities and economic and geopolitical relations will affect growth ahead in the U.S. and globally.