Monetary Base May Be Swinging Upwards

Month-over-month contraction in the monetary base is decelerating, indicating the annual rate of contraction is near a bottom. 

In October, the monetary base was $3.266 trillion, which was slightly higher than September’s level. While it was the 20th consecutive month of month-over-month contraction in the monetary base, October was the slowest rate of contraction since July 2018 and the third time in four months that the rate of contraction was slower than 10%. 

The annual rate of contraction in the money supply, -10.9%, was unchanged in October. It seems likely that the rate of contraction in the money supply has bottomed, which would be a positive sign for capital equipment consumption. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

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