Global Liquidity Latest, January 2016

by Michael J. Howell10. January 2016 19:08

Global Liquidity our forward-looking indicator of investment risk and future economic prospects slid lower at the end of 2015, closing the year at an index value of 41.8 (‘normal’ range 0-100). This compares to 50.2 for end-2014. The GLI (Global Liquidity Index) essentially trended lower consistently through 2015 and its low level warns of continued tough investment markets and slower economic activity ahead. Liquidity is not yet at the sub-30 index levels that warn of economic recession and financial crisis, but this is consistent with choppy markets that grind lower. Three particular statistics focus our attention: (1) US private sector liquidity growth (index 65.9); (2) Chinese Central Bank (PBoC) liquidity provision (index 37.3) and (3) net capital inflows/ outflows from China (minus US$146 billion, or US$0.8 trillion of net outflows for 2015). However, since PBoC actions largely rest on the pace of capital outflows, the second and third factors essentially boil down to the same capital flow question: When will China’s capital flight end?


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