Canadian household credit growth is slowest since 2001 but individual debt is already 175 percent of disposable income

Canadian household credit growth is slowest since 2001 with Household credit (Annualized 3-month growth rate) growing at 2.98% and Household Mortgage credit (Annualized 3-month growth rate) growing at 2.85%.

Canada household credit growth up to June 2018
Data Source: Bank of Canada

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Interest Rates globally are changing at the fastest pace ever

Interest Rates globally are changing (in both directions) at the fastest pace ever in the history of the modern central banking system. Nearly half of the countries in the world have cut interest rates while the other half have hiked them in the past 6 months. The average change for countries with a change in interest rate has been +0.22% in the past 6 months. Take Argentina and Turkey out and the average (global) interest rate has actually fallen.

Interest Rates 20180818
Data Source: Central Banks Globally

 

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U.S. Inflation at 2.9% is the highest since February 2012 and has outstripped wage growth for the first time since October 2012

U.S. Consumer Inflation at 2.9% is the highest since February 2012. And it isn’t just energy prices causing inflation to soar. Core inflation (which is Consumer inflation excluding volatile energy and food prices) at 2.4% has risen at the fastest pace in a decade. Here is a chart for CPI inflation growth,

US CPI August 2018
Source: Source: U.S. Bureau of Labor Statistics

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History is repeating itself, is this the end of the current cycle of global synchronised growth?

We wrote earlier this year on the downsides of synchronised global growth. We wrote that when global synchronised growth begins to end the U.S. dollar strengthens, investors run away from emerging markets, interest rates continue to rise to tame inflation and bad debt becomes an issue. All of this is happening now, first the US Dollar, here is the 1-year performance of the U.S. Dollar mapped,

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Euro Area or Eurozone Money Velocity seems to be shockingly low

We couldn’t find any official Money Velocity numbers for the Euro Area (Eurozone) so calculated it using the Equation of Exchange

Equation of Exchange

MV=PQ

Money Supply (M) * Money Velocity (V) = Price level (P) * Real economic output (Q)

Which means Money Supply * Money Velocity = Nominal GDP

Therefore, Money Velocity = Nominal GDP/Money Supply

We have the numbers for both Money Supply (from OECD – Organization for Economic Co-operation and Development) and Nominal GDP (from Eurostat) for the Euro Area.

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