Eurozone Dec M3 Growth, Private Sector Lending Below Expected

December sa M3: +1.7% y/y
M3 sa 3-mo avg: +1.6% y/y
SA private loans: +1.9% y/y

MNI survey median:
December sa M3: +2.0% y/y
M3 sa 3-mo avg: +1.6% y/y
SA private loans: +2.3% y/y

MNI survey range:
December sa M3: +1.4% to +2.2% y/y
M3 sa 3-mo avg: +1.4% to +2.3% y/y
SA private loans: +2.2% to +2.6% y/y

November sa M3: +2.1% y/y (revised from +1.9%)
M3 sa 3-mo avg: +1.4% y/y (revised from +1.3%)
SA private loans: +2.0% y/y (unrevised)
—

FRANKFURT (MNI) – Eurozone M3 money supply growth slowed more than
generally expected in December and private sector loan growth was weaker
than most analysts had forecast, according to seasonally adjusted data
released Friday by the European Central Bank.

After rebounding to 1.9% in November on the back of base effects
and one-off repo transactions, annual growth of M3 slowed to 1.7% in
December as base effects reversed. On the month, M3 fell back E14
billion to E9.525 trillion after a E49 billion rebound in November.

With annual M3 growth still well below the ECB’s reference value of
4.5%, the central bank sees little medium-term inflation risk from the
excess liquidity in the system. This is confirmed by the still subdued
growth in bank lending.

Commenting on November’s monetary indicators earlier this month,
ECB President Jean-Claude Trichet concluded, “Broad money and loan
growth is still low, corroborating the assessment that the underlying
pace of monetary expansion is moderate and that inflationary pressures
over the medium term should remain contained.”

Within M3, annual M1 growth slowed to 4.4% from 4.6% in November.
The annual decline in short-term deposits other than overnight deposits
was unchanged at 0.5%. The annual decline in marketable instruments
rewidened to 1.8% in December after an abrupt swing to a 0.5% rise in
November.

The recent steepening of the yield curve should favor a shift from
monetary assets within M3 to better remunerated longer-term assets
outside, thereby dampening growth of the broad monetary aggregate going
forward.

Among the main counterparts of M3, annual growth of total credit
granted to euro area residents slowed to 3.5% in December from 4.0% in
November. Growth of credit to governments slowed to 12.0% from 13.3%.

Annual growth of credit extended to the private sector slowed to
1.6% after accelerating to 1.9% in November. Growth of loans to the
private sector eased to 1.9% after a pick-up to 2.0% on a boost to
non-monetary financial intermediaries other than insurance corporations
and pension funds. (Adjusted for loan sales and securitisation, the
annual rise was steady at 2.3%.)

Loans to non-financial corporations were down 0.2% on year after a
0.1% decline in November. On the month, loans fell back E24 billion
after a E8 billion upturn.

In the ECB’s latest bank lending survey, banks reported a further
slight tightening of lending terms for small business and no change for
large firms. A “very slight” net tightening is expected in all
categories in the current quarter, the ECB commented.

Annual growth of loans to households picked up to 3.0% from 2.8%,
due mainly to a stronger rise in mortgage lending of 3.7%, up from 3.4%
in November. Consumer credit was down 0.9% on the year after -0.3%.
Growth of other lending to households accelerated to 2.7% from 2.3%.

Banks polled by the ECB this month expected net demand for all
types of loans to expand in the current quarter.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: M$$EC$,M$X$$$,M$XDS$,MT$$$$]