Incoming monetary information continues to disappoint: Euroland money measures barely rose in December.

Six-month growth of G7 real narrow money was strong in late 2019 but the global (G7 plus E7) measure tracked here was held back by Chinese monetary weakness. It seemed plausible that Chinese money trends would revive, pushing six-month growth of the global measure up to the 3% level judged consistent with a full economic recovery.

Chinese weakness, instead, persisted through December while US narrow money data were revised to show a September growth peak – see previous post. Euroland monetary strength may also now be fading. Non-financial M1 rose by only 0.1% month-on-month in December while non-financial M3 was flat (+0.02%). Six-month growth rates of the two measures, deflated by consumer prices, may have peaked in October – see first chart.

Incorporation of the Euroland data cuts the estimate of G7 plus E7 six-month real narrow money growth in December from 2.1% to 2.0%, which would be the lowest since August – second chart. December data for the remaining countries – with the exception of Korea – will be released on Friday.

Swedish December numbers were also released today and show a sharper fall in six-month narrow money growth than in Euroland. Swiss narrow and broad money measures, meanwhile, contracted in late 2019.

Euroland money growth is still respectable by historical standards and at the top end of the international range – third chart. This is of limited comfort given the region’s sensitivity to possible Chinese / global economic weakness and the suggestion that trends are cooling despite ECB policy stimulus, which is unlikely to be expanded anytime soon.

The Fed last week released the results of its annual revision of monetary data to incorporate updated seasonal factors and a new quarterly benchmark. The revision reduced six-month growth rates of M1 and M2 in late 2019 – see first and second charts.

The global six-month real narrow money growth measure followed here, incorporating the revised US data, now shows a clearer peak, at 2.5%, in September 2019, with December estimated at 2.1% – third chart. A “final” December number will be available at the end of the week following monetary releases for countries accounting for a further 27% of the aggregate, including Eurozone data on Wednesday.

The fall since September suggests that global six-month industrial output momentum will reach a local high around June and weaken in Q3, allowing for an average nine-month lead.

Disruption caused by the 2019 novel coronavirus (2019-nCoV) could advance economic weakness. The SARS epidemic of November 2002-July 2003 resulted in a significant but temporary slowdown in Chinese retail sales and industrial output into May 2003. This slowdown contributed to a “double dip” stagnation of G7 industrial output in H1 2003 following a 2002 recovery – fourth chart. China's share of global GDP at purchasing power parity has risen from 9% in 2003 to 20% now, according to the IMF.