Global money growth weakening again

• • 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:

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

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:

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:

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

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

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

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

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:

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

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

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

Tokyo numbers signal a slowdown in Japanese annual CPI inflation:

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

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

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

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

US underperformance mainly reflects US dollar weakness:

Japanese underperformance was signalled by relative monetary weakness.

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

Currency moves are being reflected in earnings revisions:

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

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

US growth fully reversed Q1 underperformance but quality lagged:

Growth remained under water in EAFE with quality underperforming further: