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Eurozone M3 Money Supply Shrinks, Bank Lending Growth Weakens
(RTTNews) - Eurozone broad money supply posted its first decline in more than a decade, and bank lending grew at a slower pace in July as higher borrowing costs dampen the growth outlook, official data revealed on Monday. The monetary aggregate M3 dropped 0.4 percent from a year ago after rising 0.6 percent in June, the European Central Bank reported. This was the first fall since May 2010, when M3 was down 0.1 percent. M3 was forecast to remain flat.
At the same time, the narrow measure M1 that comprises currency in circulation and overnight deposits plunged 9.2 percent in July, following June's 8.0 percent decline.
Regarding the dynamics of credit, data showed that credit to euro area residents slid 0.1 percent and that to general government declined 2.9 percent.
Within borrowing sectors, loans to households registered a slower growth of 1.3 percent after a 1.7 percent gain. The rate was forecast to ease to 1.4 percent.
Likewise, growth in loans to companies slowed to 2.2 percent from 3.0 percent. Economists had forecast an annual growth of 2.5 percent.
ING economist Bert Colijn said today's data adds to expectations of a weak eurozone economy in the quarters ahead, but as the effects remain gradual this should not be a game-changer for the European Central Bank ahead of its September meeting.
The ECB has raised its rates by a cumulative 375 basis points with hikes in every policy session of the current tightening cycle that began in July last year.
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