2016-08-15

PBoC Pre-Announces M2 Growth for August and September

The PBoC says money supply growth will increase in August and September as slow growth from August and September 2015 will fall out of the 12-month calculation. M2 growth for August, September and October 2015 was 0.27 percent, 0.15 percent and 0.15 percent. Sheng Songcheng, head of the PBoC's data department, said M2 growth could rise to 11% and even 12%.

In order to achieve 12% growth by September, M2 would have to grow at 1 percent mom for the next two months. Whether a boost in growth is coming, or the PBoC plans to baffle the market with BS remains to be seen. Year-on-year comparisons will raise the growth figure, but a growing flow is needed to maintain GDP, not simply a more favorable year-on-year comparison.

The statement from the PBoC comes as investors focus on the contraction in July credit to businesses, and Residential mortgages accounted for 102 percent of total bank lending.

Bloomberg: PBOC Says Don’t Look at Short Term After Money Supply Slumps
July credit growth slowing to a two-year low was a distortion and the reports for August and September will show it rebounding, the People’s Bank of China said Monday in Q&A statement posted to its website. Markets should avoid over-interpretation of short-term data for a specific month, the PBOC said.

The commentary also said the growing gap between two money-supply gauges, M1 and M2, isn’t an indicator of a “liquidity trap,” an economics term for when central bank cash injections into the economy fail to spur growth as monetary policy loses potency. The PBOC also said Monday it will keep monetary policy prudent and flexible, and will fine-tune it at the appropriate time. Liquidity in the banking system is ample, it said.
iFeng: 央行:M1与M2“剪刀差”与“流动性陷阱”相距甚远
iFeng: 央行盛松成:减税更有助化解企业“流动性陷阱”

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