Monday’s post argued that global six-month real money growth was on course to approach (narrow definition) or exceed (broad definition) the highs reached before the post-GFC economic recovery. New information from Euroland and China necessitates a further upgrade to the assessment. Global money growth – whether nominal / real, narrow / broad or six-month / year-on-year – may soon be the highest since the 1970s. This suggests an economic boom when pandemic containment measures are relaxed, with attendant risk of an inflationary upsurge unless the monetary overshoot is corrected early in the recovery phase – implausible given likely pressure on monetary authorities to maintain super-low rates, finance fiscal deficits and promote bank lending.

Euroland narrow and broad money (non-financial M1 / M3) rose by 2.5% and 1.8% respectively between February and March, pushing year-on-year growth rates up to 9.9% and 6.8%, the latter being the highest since 2008 – see first chart. The broad money surge was driven by a 1.5% rise in (adjusted) loans to the private sector – mainly non-financial corporations – supplemented by strong bank buying of government bonds. The latter may partly reflect front-running of ECB purchases, which were still stepping up and had a smaller monetary impact.

Six-month real narrow money growth matched a high reached in 2015, with the divergence with the manufacturing PMI comparable with early 2009 – second chart.

The money / lending pick-up was particularly strong in France, suggesting that the policy / banking sector response to the crisis has been more effective than elsewhere: M1 deposits of French non-financial corporations rose by €49 billion or 9.1% in March alone – third chart.

The good news in China was in the form of a sharp rise to a record level in the loan approvals index of the PBoC’s quarterly survey of bankers: this index leads credit and money trends – fourth chart.

The US, China and Japan, among others, have released March monetary data, with Euroland and UK numbers due this week. Global six-month real money growth, on both narrow and broad definitions, is estimated to have risen sharply. The first chart also contains April forecasts, which take into account US monetary data through 13 April while assuming 1) an oil-driven 1 pp fall in global six-month consumer price momentum and 2) unchanged nominal money growth rates outside the US. Real money growth is projected to approach (narrow definition) or exceed (broad definition) the post-GFC high. Assumption 2) suggests that forecast risk lies to the upside.

Monetary trends are strengthening across countries but the US has played a dominant role in the global pick-up. 52-week growth of M1 (nominal) and M2+ (close to the old M3 definition) rose to 24.8% and 18.4% respectively in the latest week, representing records in weekly data extending back to the early 1980s – second chart. Based on earlier monthly data, annual narrow and broad money growth is the fastest since World War Two.