Data released today (Monday) shows that Money Supply dipped in
October in China, as shown on the graph below.
"Early in the economic
cycle an increasing supply of money leads to additional spending and investment,
and later in the cycle expanding money supply leads to
inflation." Since it has been in an early cycle since the
beginning of 2012, this latest dip may or may not be a warning of further
weakness to come…one to consider monitoring over the next few months.
New
Loans also fell for October, as shown on the graph below. "Consumers and
businesses tend to seek credit when they are confident in their future financial
position and feel comfortable spending money." This data is
showing that loan demand has been on the decline since April of this
year.
So, although
there has been an expansion of money supply this year, loan demand has been
declining. Unless loan demand picks up and is sustained, how can there
be economic confidence and expansion in China?
