Remember that 17 per cent growth target for Chinese money supply this year?
It looks, err, increasingly untenable given the inflation numbers just out of the PRC.
Consumer prices rose by 2.7 per cent in February from a year ago, very much above analyst expectations of about 2.5 per cent and very close to the 3 per cent ceiling that the government set for this year. Money supply, meanwhile, grew 25.5 per cent. What does this say for the future?
The below chart courtesy of Sean Corrigan of Diapason Commodities Management is intriguing:
And the commentary:
Assuming China is serious abut its 17% YOY target for M2 this tear, it must slow the remaining 10 months to a 11.6% increase . . . a 60% deceleration from the like-period peak rate resgistered last September and fully 1 std deviation below the mean of the past decade and almost as slow as at the onset of the crisis around the turn of 2008 . . . Such a deceleration off such an extraordinary credit blow-out would be like ramming the economy headlong into that large mural edifice which runs along its historic north-western frontier . . . Then again, if they don’t, the ‘inflationary’ dragon will roar ever more loudly.
As a point of interest, Chinese dragons traditionally have 117 scales.
Coincidence? We think not.؟
Related links:
Roach: Pooh-pooh to Chinese bubbles - FT Alphaville
Chinese liquidity – and stocks – go BOOM! - FT Alphaville