Weaker monetary news

• • • • Six-month real narrow money momentum fell sharply in December in China, India and Brazil while remaining negative in Japan (see charts).
      • Consequently, global real money momentum may have crossed below industrial output growth, suggesting that the “excess” money backdrop is no longer favourable (see charts).
      • Surging JGB yields may further weaken Japanese money trends while accelerating sales of foreign bonds (see charts).
      • US consumer and producer price numbers were mixed, with the focus now on PCE data this week (see charts).
      • China continues to rely on exports to offset weak domestic demand but pressure for significant currency appreciation is mounting, with record intervention last month (see charts).
      • Eurozone job openings have fallen further, in contrast to recent US / UK stabilisation (see charts).

Chinese six-month narrow money momentum has slowed sharply since October, suggesting a loss of economic momentum in H1 2026:

Note: narrow money contraction in 2024 reflected a policy distortion but there is no similar explanation for current weakness.

December numbers were also released for India, Brazil and Japan, showing falls for the former two and continued Japanese weakness:

Assuming unchanged growth rates elsewhere, global real money momentum may have crossed below industrial output momentum, suggesting that the “excess” money backdrop is no longer favourable:

Focusing just on the G7 and using 12- instead of six-month rates of change also indicates a possible cross-over:

JGB yields surged further on the election news:

The yield shock may further depress monetary trends:

Sales of overseas bonds may accelerate:

The US December CPI report was benign but concern remains about shutdown distortions, while delayed PPI numbers through November were stronger than expected:

Chinese real GDP growth held up in H2 2025 but the deflator continued to fall:

However, growth remained unsustainably reliant on exports / industrial output, with retail sales and fixed asset investment weak and home sales continuing to slide:

Note: fixed asset investment numbers appear to have been distorted by a statistical change, exaggerating weakness.

House price deflation has reaccelerated:

Pressure for significant currency appreciation is mounting, with intervention estimated at a record $118 bn last month, based on f/x settlement data (which captures “covert” intervention via state-owned banks):

Eurozone job postings continued to fall into early January, in contrast to recent US / UK stabilisation:

UK estate agents have turned optimistic about sales expectations, despite new buyer enquiries remaining depressed:

Japan is leading YTD performance with the US continuing to lag:

Style wise, high yield has started strongest with quality slightly better but growth lagging: