Further to my recent post on narrow money supply growth: Eurozone M1 has also likewise shown recent, though unspectacular (in historical terms), growth:
But the rise in narrow money has not been followed by broader monetary aggregates, in particular the core components of those aggregates:
Likewise when we look at MFI (monetary financial institutions) loans (ex gov’t) we find significant recent weakness:
Whether we look at non financial corporations:
But Central bank assets have stormed ahead, plugging funding gaps in Eurozone banks balance sheets to provide some ephemeral respite banks and to distressed sovereign debt markets. The Eurosystem’s (ECB and National Central Banks) consolidated balance sheets are currently some 33% of the Eurozone GDP.
With so much central bank manipulation of money supply and issues with bank balance sheet dynamics, it may not be growth in narrow monetary aggregates that we need to be looking to, but greater certainty and stability of consumer and government expenditure, as well as export demand. With uncertainty over government expenditure and key developing export markets, it would seem that Europe would depend more on the consumer, and even here we are talking about consumers in high employment economies such as Germany. We may therefore need to keep a closer watch over key consumer fundamentals than narrow money supply growth.