The ECB today provided more details about its asset-backed securities (ABS) and covered bonds purchase programmes but gave no encouragement to forecasts that it will soon begin buying government bonds on a large scale. This may reflect a judgement that its actions since June coupled with a weaker exchange rate have delivered sufficient stimulus for now. More likely, the Governing Council remains deeply split on “full” QE.

The most important new information today was President Draghi’s statement that the “potential universe” of the ABS and covered bonds programmes is up to €1 trillion. The QE programmes in the US, Japan and UK have resulted in the respective central banks owning 19-26% of the stock of central government securities. Similar ECB ownership of the ABS / covered bonds universe would imply buying of €200-250 billion in total – lower than many estimates and equivalent to only 2.1-2.6% of annual GDP.

The ECB could buy a higher proportion of the outstanding stock and the universe is likely to expand as the central bank bids up prices. The former possibility, however, may be limited by liquidity considerations while the latter will take time.

With the new targeted longer-term refinancing operations (TLTROs) likely, at best, to offset the expiry of the 2011 / 2012 three-year repos over the next six months, ECB balance sheet expansion is likely to prove slow and it remains doubtful that President Draghi’s aim of an eventual return of assets to the early 2012 level – implying a rise of at least €600 billion – can be achieved without further initiatives.

Global six-month real narrow money growth fell sharply in August, based on data covering 90% of the aggregate followed here. September / October data should be awaited to assess whether this represents a genuine change of trend; if so, the suggestion is that the global economy will lose momentum in early 2015.

Six-month real narrow money growth picked up around end-2013 and remained solid through July, consistent with respectable economic expansion through end-2014, allowing for the usual half-year lead – see first chart. The August reading, however, was the lowest since May 2012, ahead of a significant slowdown in industrial output – see first chart.

The August fall in the global measure mainly reflected big declines in the US and China. Eurozone real money growth has firmed modestly, while Japanese weakness may be starting to reverse – second chart.

The focus now shifts to the global longer leading indicator monitored here, an August reading of which will be available on 8 October. This indicator typically leads the industrial cycle by 4-5 months and has yet to signal a peak in output expansion – third chart.

There is a reasonable chance that real money growth will rebound in September / October. US weekly data so far in September have partially reversed August weakness. Eurozone money trends may continue to strengthen in response to recent ECB policy easing. Lower energy costs should result in the six-month rate of change of global consumer prices falling temporarily, supporting real money growth. The six-month change in Japanese real money, meanwhile, should turn positive again in October as the April sales tax rise drops out of the calculation.