Weekly Commentary: Monetary Disorder

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
Global Credit, Bubble and market analysis is turning more interesting.
China August Credit data were out Friday. Total (aggregate) Social Financing jumped to 1.48 TN yuan ($225bn), up from July’s 1.22 TN and above the 1.28 TN estimate. New Loans were reported at a much stronger-than-expected 1.09 TN (estimates 750bn yuan), up from July’s 825bn. New loans expanded 13.2% y-o-y. Through August, Total Social Financing is running 18% above 2016’s record pace. Total system Credit growth (‘social financing’ plus govt. borrowings) appears on track to surpass $4.0 TN. While ‘shadow banking’ has of late been restrained by tighter regulation, household (largely real estate) borrowings remain exceptionally strong.
It was the weaker Chinese economic data that made the headlines this week. Retail sales (up 10.1% y-o-y), industrial production (up 6.0%) and fixed investment (up 7.8%) were all somewhat below estimates. At the same time – and I would argue more importantly – Chinese inflation is running hotter than forecast. Considering the scope of the ongoing Credit expansion, inflationary pressures should come as no surprise.
September 10 – Bloomberg: ‘Inflationary pressure emanating from the factory to the world is proving more resilient than economists have anticipated. China’s producer-price inflation accelerated to 6.3% in August from a year earlier, exceeding all but one of 38 estimates… That data… followed 5.5% readings in the prior three months… The surprise strength gives support for global inflation spanning from metals to fuel and shows the effects of resilient domestic demand and reduced supplies of some commodities.’

This post was published at Wall Street Examiner by Doug Noland ‘ September 16, 2017.