post in August argued that global monetary trends were at a critical juncture. A sustained fall in six-month real narrow money growth was signalling a slowdown in economic momentum during H2 2021. The money numbers, however, were showing signs of stabilising and a recovery during Q3 would warrant hopes of a stronger economy in H1 2022.

Far from recovering, real money growth has continued to decline, implying an intensification of the economic slowdown into Q2 2022, at least. Underlying weakness, however, could be temporarily obscured by a bounce-back in industrial output as supply constraints ease.

Chart 1 includes an October estimate of G7 plus E7 six-month real narrow money growth, based on monetary data covering 70% of the aggregate and near-complete inflation numbers. The October reading is the lowest since August 2019 and towards the bottom of the post-GFC range.

Chart 1

The further lurch down in October reflected both a continued nominal slowdown and a rebound in six-month consumer price momentum, although the latter remains below a July peak – chart 2.

Chart 2

A slowdown in commodity prices still suggests support for real money growth from a moderation of CPI momentum – chart 3. The timing, however, is uncertain and any inflation relief could be offset by a further fall in nominal money growth as central banks wind down stimulus / tighten.

Chart 3

While monetary trends are signalling a slowdown through Q2 2022, cycle analysis suggests that a stockbuilding downswing will be acting as a drag on the global economy by H2 2022 (assuming that the current cycle is of average length). The window for a growth pick-up in 2022, therefore, may be closing.