Via Tyler Cowen on Twitter was this article, combined with the comment “credit growth sluggish”. The view here is that the 4% growth in private sector credit is too weak when compared with historic averages – and that the goal of the Fed should be to focus on the “quantity of credit” here, rather than target the price.
Now in New Zealand we have similar data here. According to this, private sector credit growth was 2.3% year-on-year (or 3.2% if we exclude repurchase agreements – which is preferable IMO). This compares to a decade-long average of 7.3%pa (8.3%pa), and if we were solely quantity focused this would seem insufficient. [Note: I did decade instead of history, as the implicit inflation target moved significantly over the decades – a factor that pushes this figure around. Would be best to look at “real growth” for a longer-term focus]
I’m not concluding anything from this per se – it is just interesting that NZ analysts are running around getting concerned about inflation and rising credit growth, while analysts in the US, who are observing stronger credit growth than we are, are generally complaining that more needs to be done. Tbf, their unemployment rate is a lot higher, and their output gap is correspondingly larger (presumably).
But with underlying inflation in the lower end of the RBNZ’s target, credit growth numbers objectively soft, and the unemployment rate undeniably elevated I feel that the inflation calls may be a touch overplayed. [Note: A relative price lift in construction due to a rebuild in Canterbury is not inflation – it is a signal of scarcity, as prices are supposed to be].