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Weekly Economic Letter
7
0
Financial markets or credit aggregates: Who to believe?
Tue, Oct 27 2009, 06:38 GMT
by Economic and Strategy Team
Summary
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The world’s central banks have pumped massive amounts of liquidity into the economy and the global money supply is without a doubt accelerating. These exceptional efforts have had a deep impact on all financial markets, so much so that the financial crisis is now definitely drawing to a close.
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Still, some observers continue to be concerned about the economy because bank credit aggregates do not seem to have changed tone yet.
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As it turns out, credit aggregates make very poor leading indicators of the economy for a very simple reason: They more often than not trail activity.
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Actually, credit is to the financial markets what nonresidential construction is to the housing sector: a lagging indicator of activity. In fact, consumption growth tends to decline before credit growth in periods of recession and tends to rebound before in periods of recovery.
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Hence, in our opinion, the improvement in the financial markets speaks much louder than does the present behaviour of credit aggregates.
Published on Tue, Oct 27 2009, 06:41 GMT
Archive
- U.S. investment: A boon for Canadian exports in 2010!
Published On Tue, Nov 17 2009, 06:45 GMT - A look at the Canadian mortgage market
Published On Tue, Nov 10 2009, 06:34 GMT - How will U.S. trade contribute to GDP growth as economy expands?
Published On Tue, Nov 3 2009, 10:48 GMT - Financial markets or credit aggregates: Who to believe?
Published On Tue, Oct 27 2009, 06:38 GMT - Housing market correction in Canada: Nothing like in U.S.
Published On Mon, Oct 19 2009, 19:23 GMT
National Bank of Canada
| 1100 University, 11th floor Montreal (Québec) H3B 2G7
http://www.nbc.ca/ | info@nbc.ca
Legal disclaimer and risk disclosure
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.Related reports
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