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Money & Cycles Weekly Bulletin

Global money growth weakening again

July 7, 2025 by Simon Ward

    • Global six-month real narrow money momentum fell sharply between March and May, suggesting economic weakness from late 2025 (see charts).
    • The next economic weak phase is likely to be significant / sustained because the stockbuilding cycle is approaching a peak exaggerated by tariff front-running (see charts).
    • Meanwhile, real money momentum appears to have crossed beneath industrial output momentum, suggesting an unfavourable liquidity backdrop for equities (see charts).
    • The US labour market report wasn’t weak enough to shift the Fed (see charts).
    • Chinese money market rates eased and Hong Kong money growth picked up further (see charts).
    • Japanese / Eurozone inflation news remains benign (see charts).
    • UK money trends are diverging negatively, confirming that the MPC is too late and suggesting economic / equity market underperformance (see charts).

Global six-month real narrow money momentum fell again in May, as weaker nominal growth offset a further decline in CPI momentum:

Chart 1 showing G7 + E7 Real Narrow Money (% 6m)

Falls have occurred across countries, with alarming weakness in Japan / the UK:

Chart 2 showing Real Narrow Money (% 6m)

The Eurozone has closed the gap with the US but has yet to move ahead, despite the ECB cutting much more than the Fed (200 bp vs. 100 bp).

Global manufacturing PMI new orders ticked up in June, although an alternative indicator based on national surveys slipped back:

Chart 3 showing Global Manufacturing PMI New Orders & G7 + E7 National Business Survey Indicator

A stabilisation or recovery in the PMI would fit with an earlier rise in real money momentum but the reversal lower since March suggests renewed survey weakness from around late 2025:

Chart 4 showing Global Manufacturing PMI New Orders & G7 + E7 Real Narrow Money (% 6m)

 

The next economic weak phase is likely to be significant / sustained because the stockbuilding cycle is approaching a peak exaggerated by tariff front-running:

Chart 5 showing G7 Stockbuilding Cycle G7 Stockbuilding as % of GDP (yoy change)

 

Meanwhile, six-month real narrow money momentum appears to have crossed beneath industrial output momentum, suggesting an unfavourable liquidity backdrop for equities:

Chart 6 showing G7 + E7 Industrial Output & Real Narrow Money (% 6m)

 

US private payrolls rose by the least since October last month, with high likelihood of a downward revision:

Chart 7 showing US Private Payrolls (mom change, 000s)

The unemployment rate has fallen back because of a rise in economic inactivity among younger workers (16-24) and older cohorts (55+):

Chart 8 showing US Unemployment & Inactivity

 

The CNH / CNY forward differential suggests that the RMB remains under upward pressure, with settlement data likely to show further f/x purchases last month:

Chart 9 showing China Net F/x Settlement by Banks Adjusted for Forwards ($ bn) & Forward Premium / Discount on Offshore RMB (%)

Money market rates have eased, possibly presaging another cut in official rates:

Chart 10 showing China Interest Rates

Hong Kong money growth picked up in May as local rates collapsed:

Chart 11 showing Hong Kong HKD Money Measures (% yoy)

The Taiwanese dollar hit a new high despite central bank intervention:

Chart 12 showing East Asia Currencies vs US Dollar 31 December 2024 = 100

 

Tokyo numbers signal a slowdown in Japanese annual CPI inflation:

Chart 13 showing Japan Consumer Prices (% yoy)

Core earnings growth remains subdued, suggesting that headline pay awards overstate economy-wide wage pressures:

Chart 14 showing Japan Scheduled Earnings (% yoy) & Agreed Rise in Base Pay in Spring Shunto

Eurozone CPI numbers were consistent with the ECB’s dovish forecast:

Chart 15 showing Eurozone Consumer Prices (% yoy)

 

Alarming UK monetary weakness suggests that the economy is heading for renewed contraction:

Chart 16 showing UK GDP (% 2q) & Real Narrow / Broad Money (% 6m)

YTD equity markets: Europe overtook China in Q2, with the US / Japan continuing to lag:

Chart 17 showing MSCI Price Indices USD Terms, 31 December 2024 = 100

US underperformance mainly reflects US dollar weakness:

Chart 18 showing MSCI Price Indices Local Currency Terms, 31 December 2024 = 100

Japanese underperformance was signalled by relative monetary weakness.

The US dollar is at its weakest since 2022 vs. other major currencies:

Chart 19 showing Current vs Previous Kondratyev Cycle US Dollar Index* *Current = FRB Index vs Advanced Foreign Economies 54y Ago = IMF Effective Rate, Rebased

Currency moves are being reflected in earnings revisions:

Chart 20 showing Earnings Revisions Ratios (MSCI Indices, IBES, sa)

Industrials and financials have been the strongest sectors globally, with consumer discretionary and health care weakest:

Chart 21 showing MSCI World Sector Price Indices Relative to MSCI World, 31 December 2024 = 100

IT and health care have underperformed their earnings revisions ranking, while industrials have outperformed:

Chart 22 showing MSCI World Sector Earnings Revisions Ratios (IBES, sa)

US growth fully reversed Q1 underperformance but quality lagged:

Chart 23 showing MSCI US Style Indices Relative to MSCI US, 31 December 2024 = 100

Growth remained under water in EAFE with quality underperforming further:

Chart 24 showing MSCI EAFE Style Indices Relative to MSCI EAFE, 31 December 2024 = 100

NS Partners Ltd.
July 7th, 2025