Tuesday, December 17, 2013

Europe’s Weak Money & Credit (excerpt)

I’ve recently noted that the rebound in the Eurozone’s PMIs in recent months isn’t showing up in the hard economic data for the region. Yesterday, Markit reported that the Eurozone’s flash Composite Output PMI rose from 51.7 in November to 52.1 in December. That’s a three-month high. Germany's reading ticked down from 55.4 to 55.2, while France's fell from 48.0 to 47.0. The Eurozone's M-PMI rose to a 31-month high of 52.7, with Germany's rising to 54.2, while France's fell to 47.1. The NM-PMI for the Eurozone was little changed at 51.0.

The big problem in the Eurozone is that banks account for much of the credit available in the region, and their loan portfolios continue to decline. Lending has been in negative territory every month but two since October 2011. The growth rates of the monetary aggregates have been decelerating all year, with October’s M3 up just 1.4% y/y, the lowest since October 2011.

Today's Morning Briefing: Happy Homeland. (1) Bittersweet ending. (2) Tiny taper ahead? (3) Low inflation won’t be a taper-killer if it helps keep yields down. (4) Productivity driving inflation lower and profit margins higher. (5) Hot coincident indicators. (6) Whatever is the matter with Washington may matter less. (7) Happy Eurozone PMIs again, but banks aren’t lending. (8) Abe should be thankful for latest Tankan survey. (9) A warning about profit warnings. (10) Forward earnings at another record high. (11) Focus on overweight-rated S&P 500 Information Technology. (More for subscribers.)

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