Six-month expansion of global real narrow money* is estimated to have recovered in December, though remains lower than last spring. Allowing for the typical half-year lead on the economy, the suggestion is that output growth is at a peak currently but will stay solid through mid-2014.

December monetary data have been released for the US, Japan, China, India and Brazil, together accounting for about 60% of the global aggregate monitored here. Assuming constant six-month rates of change in other economies, global real money expansion rose to 3.1% (not annualised) last month from 2.3% in November. The December estimate is incorporated in the first chart, which also shows industrial output growth through November.

The December improvement does not alter the assessment here that 1) global economic growth is at or close to a peak currently and 2) there is no longer “excess” liquidity available to power generalised financial asset price inflation. Six-month real money expansion is below its level last spring (3.7% in May) and the previous gap with output growth has closed.

The December rise was driven by the US, China and India. Real money trends slowed further in Japan and remain negative in Brazil – second chart.

The final December global number will depend importantly on Eurozone results released on 29 January. The annual update of US seasonal factors this week may also affect the recent profile.

*Global = G7 plus E7 large emerging economies. Narrow money refers to forms of liquidity held by households and firms, excluding banks, that can be used in immediate settlement of transactions. Country definitions vary but include, at a minimum, currency and demand deposits while excluding time deposits and notice accounts. Narrow money should be distinguished from the monetary base, comprising currency and bank reserves with the central bank.