Thursday, 27 September 2012

Euro area Monetary Base & Money Supply (as of 31.08.2012)

The European Central Bank (ECB) reported its monetary statistics for the euro area for the period ending August on 27 September 2012.

Base money continued to increase massively on last year, but over the past six months it has been relatively stable. The M1 monetary aggregate continued to increase on last year and the Year-on-Year (YoY) percentage change for August was the highest reported for 23 months. The increase on last month of 1.8% was the highest since Jan-09 (43 months ago). The M2 also continues it upward climb at a fairly steady rate. Both the M1 and the M2 hit new all-time highs in August, while base money was lower than the record €1,774,568 million reported in Jun-12.

The M1 Money Multiplier continues to remain significantly lower than its median (ca 36% lower as of August) and if (when?) it starts converging to its historical median, the increase in M1 money supply will be significant. Needless to say, this would lead to massive consumer price inflation if it ever were to happen. The euro area and the ECB therefore face a similar problem to that of the U.S. (see here).

Base Money (M0). YoY base money increased by 49.1% from €1,184,512 million in Aug-2011 to €1,766,244 million in Aug-2012. On a monthly basis base money increased by 0.9%.

M1 Monetary Aggregate. YoY M1 increased by 5.5% for the month from €4,781,257 million in Aug-11 to €5,045,114 as of Aug-2012. Compared to last month, M1 increased by 1.8%.

M1 Money Multiplier (M1/Base Money). The multiplier for the month was 2.86 which was 29.2% lower than Aug-2011 and 35.94% lower than the median. On a monthly basis the multiplier increased by 0.9%.

M2 Monetary Aggregate. M2 increased by 3.5% YoY to €8,877,601 million. On a monthly basis it increased by 0.4%.


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