Monetary conditions in March appear to have tightened (log annual and monthly changes; seasonally adjusted):
M2 growth fell to 6.0% yoy, which is more than a little worrying – as a rule of thumb, you want to see money growth approximate real growth plus inflation. Having said that, real indicators have been pretty strong, and loan applications (demand) and especially approvals (supply) look decent; these imply that much of the drop off in money growth is coming from other components of M2.
I was really concerned when I first heard the news last week. After having a peek at the data, I’m don’t feel much better (log annual and monthly changes):
M2 growth is pretty weak at a tad over 6%, even after taking into account CNY effects. Overall, money supply growth has been below 8% for the last eight months. That’s uncomfortably low – lower than I’d like it to be. It implies either slower growth, or disinflationary pressure.
Apropos of the Monetary Policy Committee Meeting last week, monetary conditions in Malaysia for 2013 up to March mirror developments in prices and incomes (log annual and monthly changes; seasonally adjusted):
The other day, I characterised monetary conditions as boring – seems I might have spoken too soon. What is going on in the interbank and money markets? (RM millions)
Trading volume on the money market for 2012 (which covers MGS, T-Bills, BNM Bills, NIDs and BAs – I know, that’s a lot of acronyms) is a quarter below the average of 2011. December 2012 trading volume was just RM21.5 billion, which is less than half the average for 2012 – much of the drop has occurred in the last two months of the year.
I was looking at liquidity conditions, and found something interesting, but I’ll get to that in a bit. M1 growth decelerated sharply in October, although M2 showed a slight uptick in growth (log annual and monthly changes; seasonally adjusted):
I haven’t done one of these in quite a while, mostly through sheer lack of time, but given the upcoming Monetary Policy Committee meeting this Thursday, now is as good time as any to reboot.
Over the last quarter, broad money supply growth has fallen off (log annual and monthly changes; seasonally adjusted):
Local monetary conditions in May appeared to be a little tighter, though growth in M2 looks to be within a “normal” pace of activity (log annual and monthly changes; seasonally adjusted):
M1 growth crashed however on a monthly basis, largely from a drop-off in demand deposits. Broad money growth was better, but only due to higher savings deposits offsetting falls in other money substitutes, but particularly in forex deposits.
With the next Monetary Policy Committee meeting due exactly one week from today, it’s nice timing to have January 2012 data on hand to give us an idea of what likely moves are in store for monetary policy.
The bottom-line: nowhere fast. I don’t see anything that would prompt BNM to either cut rates or raise them. If anything, I’m starting to think the bias will be towards a rate hike going into the end of the year.
But that’s getting ahead of myself.
Now that we know interest rates aren’t going to be cut, at least until March, what did the latest data tell BNM?
The money supply situation doesn’t look too gloomy (log annual and monthly changes; seasonally adjusted):
In fact, it looks positively healthy to me – maybe even too healthy. Both M1 and M2 are growing at near 14% on an annual log basis, and monthly growth is pretty positive as well. Breaking it down, there were decent increases in pretty much all major categories except in forex deposits, which isn’t too surprising given the turmoil in global markets during the holiday period.
Quite unlike October, money supply in November rose largely based on higher FD’s but saw currency in circulation and current deposits fall (log annual and monthly growth; seasonally adjusted):
Money supply in October was a little schizophrenic – M1 growth rose sharply from higher demand deposits, but M2 growth dropped from lower FDs (log annual and monthly changes; seasonally adjusted):
Malaysian money supply growth accelerated through the quarter ended September, helped by a nice dose of extra fixed deposits and forex deposits (log annual and monthly changes; seasonally adjusted):
Money supply growth was fairly steady over the course of the last half of 2010, but as we get into the Year of the Rabbit, things have changed (log annual and monthly changes; seasonally adjusted):
Seasonally adjusted M1 rose RM9.9 billion (RM 15.6 billion unadjusted) mainly from higher demand deposits and an unseasonally high cash injection. M2 growth accelerated as well from much the same factors, with the rest of the components rising marginally or not at all.
This post is over two weeks late, but what with CNY and other news taking centre stage, plus because this post looks at conditions near two months ago, I think that’s a little allowable.
Money supply growth was mostly stable in December, though seasonally adjusted annual M2 growth slowed to 6.9% in log terms (log annual and monthly changes; seasonally adjusted):
I’m late with this as usual. But it’s always useful to review happenings over the last few months, especially when they’re as surprising as this data is.
In terms of the money supply, not a whole lot changed in November (log annual and monthly changes; seasonally adjusted):
Fascinating things going on in the monetary side of the economy, though you won’t know it from the money supply data (log annual and monthly changes; seasonally adjusted):
Monetary conditions were more or less stable over the past few months, but with narrow money falling as BNM took in old notes and coins in the aftermath of Ramadhan (log annual and monthly changes; seasonally adjusted):
With most of August falling within the month of Ramadhan, an uptick in the money supply is to be expected – much like for Chinese New Year, BNM makes available newly printed money (the physical kind) for “duit raya” and “ang pow”.
On that basis, an acceleration in M1 growth is normal (log annual and monthly changes; seasonally adjusted):
There’s lots of things to talk about this month, but I haven’t much time to go into detail just yet. So this will be short and sweet, until I can go over the numbers fully.
First news is that BNM has revamped the presentation of the Monthly Statistical Bulletin – there are a few new things in there such as extended coverage of the banking system, and a few losses like the full breakdown of the money supply aggregates.
But as far as the monetary numbers are concerned, what I’m seeing is basically a continuation of some of the trends we’ve been seeing in the past few months. Money supply growth has held steady in July (log annual and monthly changes; seasonally adjusted):
Despite three consecutive 25bp hikes in the Official Policy Rate, growth in M2 is keeping pretty steady (log annual and monthly changes, seasonally adjusted):
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