Money Supply Growth Generally Elevates; Japan Is the Exception

Money supply growth globally shows broad acceleration across countries. 12-month growth is faster than it was 12-months ago for every country in the table except the United Kingdom. Compared to growth rates two-and three-years ago, all countries show current money growth is stronger.

Monetary stimulus is in play. Monetary growth also shows shorter-term building stimulus as 6-month growth exceeds its 12-month pace and 3-month growth exceeds its 6-month pace broadly- in all countries except the U.K. In the EMU, this sort of sequential growth is also advancing for credit in addition to for money.

Monetary and credit stimulus is in train – at least nominally.

Real variables, however, show flat to slightly weaker real money growth in the EMU. Similarly, in the EMU, credit growth runs from slightly weakening to flat growth and growth rates that are still negative reveal contracting credit.

Elsewhere real money growth in the United States has transitioned from a contraction in real balances over two years to showing growth and accelerating real balance growth from 12-months to six-months to three-months. However, the growth in real balance effects is not broad outside the United States. U.K. real balance growth remains negative, and it shows real balances shrinking at an increasingly rapid pace. The same is true in Japan where real balance growth is contracting at an increasingly rapid pace. Only the U.S. shows real balances and nominal money growth accelerating.

The most interesting observation here is the finding that nominal money balances are accelerating but real balance growth is weakening or flat except for the U.S. where both show increasing stimulus. Inflation has generally stopped falling and in each country in the table; the 12-month low for inflation is higher than the current year-on-year pace for all countries– and most show at least a minor inflation uptick is in progress.

Year-over-year inflation is higher over six months in the U.K. and in Japan. In the EMU the pace is lower by 0.1% annualized and in the U.S. the PCE inflation is lower by 0.1% based on annualized rates over the last six months. Inflation has fallen in an environment of weak growth. Weak growth is amply demonstrated by the U.S., EMU, U.K., and Japan that show falling year-on-year output on the industrial production globally. From 24 y/y calculation over these four countries for the last six months, there is only one monthly year-on-year IP gain and that was for year-on-year IP growth in the U.S. in June of 2024. Globally growth remains weak.

Globally nominal money supply is broadly accelerating. But real balances show a different result. Only the U.S. shows stimulus on both gauges. Inflation is stuck and even shows some signs of an uplift. The future is uncertain as the U.S., the largest global economy, is pondering a number of potentially disruptive actions. U.S. policy remains as a wildcard in the outlook for global growth and inflation.