April sa M3: -0.1% y/y
M3 sa 3-mo avg: -0.2% y/y
SA private loans: +0.1% y/y

MNI survey median:
April sa M3 -0.3% y/y
M3 sa 3-mo avg: -0.3% y/y

MNI survey range:
Mar sa M3 -0.7% to +0.1% y/y
M3 sa 3-mo avg: -0.9% to flat y/y

March sa M3: -0.1% y/y
M3 sa 3-mo avg: -0.1% y/y
SA private loans: -0.2% y/y
—

FRANKFURT (MNI) – Eurozone M3 money supply continued to contract on
the year in April, though by less than generally expected, while private
sector loans grew for the first time since August 2009, the European
Central Bank reported on Monday.

At the end of April, M3 amounted to E9.392 trillion, reflecting a
monthly gain of 0.7% and an annual decrease of 0.1%. Over the three
months to April, broad money fell 0.2% over the same period one year
ago.

The ECB once again stressed in its Monthly Bulletin that due to the
steep yield curve, which would spur the allocation of funds into
longer-term funds outside of M3, broad money growth understated the pace
of underlying monetary growth.

“At the same time, the still narrow spreads between the interest
rates paid on different M3 instruments imply low opportunity costs of
allocating funds to overnight deposits rather than other M3
instruments,” ECB President Jean-Claude Trichet said at his press
conference in earlier this month.

Possibly responding to criticism that the ECB’s bond purchase
program would lead to inflationary pressures later on, Trichet
highlighted in a recent interview the decline in M3 as evidence that
inflation was under control.

In its latest Monthly Report, the Bundesbank also stressed that
monetary data did not signal any clear danger to price stability.
However, the central bank conceded that the inflation outlook was highly
uncertain.

“The inflation projections made on the basis of monetary data
continue in the aggregate to indicate that there exists no pronounced
danger for price stability in the euro area for the next three years,”
the Bundesbank said.

Among the components of M3, currency in circulation and overnight
deposits (M1) were up 1.75% since March, leaving M1 10.7% higher on the
year.

M2, which is made up of M1 as well as short-term deposits other
than overnight deposits, increased by 0.56% between March and April,
resulting in an annual growth rate of 1.4%. Conversely, short-term
deposits other than overnight deposits contracted by 8.5% on the year in
April, down from March’s -8.0% print.

Turning to the main counterparts of M3, total credit extended to
Eurozone residents shrank by 1.8% on the year, unchanged from March’s
rate. Credit extended to government slowed to an annual growth rate of
8.7%.

Overall credit to the private sector accelerated to a growth rate
of 0.3%, with loans to the private sector increasing 0.1% on the year.

However, once again, the overall figure masks diverging trends
within the category.

Credit extended to households increased to +2.5% annual growth, up
from the previous month’s +2.1%, with the annual growth rate for
mortgages rising 2.9% and consumer credit falling 0.3%, up from March’s
-1.1% level.

On the other hand, lending to non-financial corporations fell 2.6%,
down from March’s -2.4% reading.

Nevertheless, with loans to non-financial corporates known to lag
economic developments, current data suggested that the downward trend in
the annual figures could soon come to an end, Trichet said.

–Frankfurt newsroom +49 69 720 142; e-mail:frankfurt@marketnews.com

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