German and Japanese outlooks diverge sharply
Different money supply dynamics are creating divergent economic futures
Recent data coming from Germany and Japan point to dramatically different economic growth outcomes over the coming year or so.
With Germany we saw the release of the industrial production data for March. These showed that the yearly growth rate of industrial production rose to -0.4% from -4.1% in February. Last March it stood at -4.6%.
When we use our real money supply (AMS) leading indicator we can see that, although the yearly number is still negative, the expected trend is clearly improving ahead.
In Japan the situation could not be more different.
In March the yearly growth rate of their index of leading indicators declined to -3.8% p.a. from -3.3% p.a. in February. This time last year it was sitting at 2.5% p.a.
Below is the prognosis for this index for Japan - and from a monetary perspective the outlook appears to be heading south.
The money supply dynamics for Germany and Japan show that the two economic outlooks could not be more different. For Germany the monetary environment suggests slow, steady recovery while for Japan all money supply metrics are heading lower - steeply lower.
As always, follow the money…