Globally, Money Supply Growth Heats Up

Money growth is accelerating globally as money growth is positive over 12 months in all countries in the table as money supply completes the transition from contracting to expanding in the wake of the Covid disruption. European Monetary Union money growth is up by 2.6% over 12 months, U.S. money growth is up by 3.1%, U.K. money growth is up by 3.4%, and Japan's M2 plus CDs is up by 1.2% over the last year.

In the United States and the euro area both show money growth accelerating from 12-months to six-months to three-months. The U.K. shows fairly steady increases in the growth rate of money supply with a slight step down over six months; that then has speeded up over three months. Japan's money growth shows positive growth rates over each horizon without a clear trend developing from 12-months to 3-months.

In inflation-adjusted terms (or real terms), the euro area shows accelerating money supply growth. The U.S. shows the same trend with money growth picking up from 12-months to six-months and then holding that higher growth rate over three months. In the United Kingdom, real money supply growth is slowing - but only very slightly. Japan's real money supply growth shows contractions over 12 months, over six months, and over three months. Japan doesn't exactly show a trend but the declines over three and six months are deeper than the annual rate decline over 12 months.

The euro area shows positive credit growth in nominal terms over three months, six months, and 12 months. In real terms, the euro area shows positive credit growth over three months and six months, after shaking off a decline over 12 months.

The year-over-year chart of money growth shows some clear trends for money growth where the U.S., the euro area, and the U.K. demonstrate clear accelerating trends in money growth are underway. For Japan, money growth continues on a very long and slow decelerating path that dates back to 2021 and then shows a slight pick up the pace of deceleration in 2024.

Globally inflation rates are mostly flattened out at a pace above that targeted by central banks. With inflation targets of 2% in all these countries, we're seeing inflation level out at rates somewhat above 2%. Japan is an exception where inflation has actually been accelerating slightly but only over very recent horizons and for its policy rate that is for the core excluding fresh foods. The euro area has gotten its headline inflation rate back down inside of its 2% target, but the core continues to be excessive at a pace of about 2.8%. And industrial production trends in these countries continue to show output declines. Growth is generally disappointing globally except in the United States where it continues to hold up, where consumer spending continues to be quite firm, and where the savings rate has even been rising. However, globally labor markets continue to perform extremely well with unemployment rates remaining quite low by historic standards. Monetary policy in most places is generally considered to be in a declining phase with the exception being Japan. Even in the United States where some disappointing inflation news has recently been posted, where growth has been solid, and where a third quarter growth appears to be developing at a pace above 3%, Federal Reserve officials who've commented on the outlook for monetary policy even very recently, continue to look for interest rates to decline amid those conditions. However, with new governments in place in all these countries, the outlook for policy, in particular for fiscal policy, remains a wild card for the period ahead.