June sa M3: +2.1% y/y
M3 sa 3-mo avg: +2.2% y/y
SA private loans: +2.5% y/y

MNI survey median:
June sa M3: +2.4% y/y
M3 sa 3-mo avg: +2.3% y/y
SA private loans: +2.6% y/y

MNI survey range:
June sa M3: +2.0% to +2.6% y/y
M3 sa 3-mo avg: +2.1% to +2.3% y/y
SA private loans: +2.4% to +2.8% y/y

May sa M3: +2.5% y/y
M3 sa 3-mo avg: +2.2% y/y
SA private loans: +2.7% y/y
—

FRANKFURT (MNI) – Eurozone M3 money supply and private sector loan
growth rates both slowed more than generally expected in June, the
European Central Bank reported on Wednesday.

The annual growth rate of loans eased to 2.5%, undershooting
forecasts for a slowdown to +2.6%. After adjusting for loan sales and
securitisation, loan growth came to +2.7% after May’s +3.0%.

The annual growth rate of loans to households slowed 0.2 percentage
points to +3.2%, while loans to non-financial corporations picked up to
+1.5% from May’s +0.9% rate.

Total credit granted to Eurozone residents eased to an annual
growth rate of +2.6% from 3.1% in May. Government credit increased 4.6%,
down from May’s +5.7%.

It remains important for banks to continue providing the private
sector with credit “in an environment of increasing demand,” the ECB
stressed in its latest Monthly Bulletin.

“To address this challenge, where necessary, it is essential for
banks to retain earnings, to turn to the market to strengthen further
their capital bases or to take full advantage of government support
measures for recapitalisation,” the central bank added.

“In particular, banks that currently have limited access to market
financing urgently need to increase their capital and their efficiency.”

On Thursday the ECB will publish the results of its July Bank
Lending Survey. The report will give an overview of credit standards in
the second quarter of this year, as well as how banks may tighten or
loosen them in 3Q.

Turning to M3, broad money supply increased to E9.69 trillion,
resulting in an annual growth rate +2.1% after +2.5% in May. Between
April and June, money supply increased 2.2% compared to the same period
one year ago.

While annual M3 growth remains well below the ECB’s guideline of
4.5% rate, implying subdued underlying inflationary pressures, upside
price stability risks stemming from high commodity prices pushed the
central bank to hike its main refinancing rate for the second time this
year.

Policy-makers remain in a state of “strong alertness”, Bank of
France Governor Christian Noyer said in a recent interview explaining
the ECB’s rate hike in July.

“We wanted to send a clear signal that inflationary pressure from
rising oil and commodity prices must not be transformed into permanent
price increases via second-round effects.”

Among the components of M3, M1 narrow money annual growth was
unchanged at 1.2%, further suggesting that the economic recovery is
slowing.

Short-term deposits other than overnight deposits slowed to +3.7%
y/y from May’s +3.9%. Annual growth in marketable instruments slowed
sharply to +0.5% after rising 2.9% in May.

Among the deposits included in M3, household deposits slowed 0.2
percentage point to +2.1%, while deposits made by non-financial
corporations rose 4.5% after +3.7% in May.

— Frankfurt bureau: +49 69 720 142, email: frankfurt@marketnews.com —

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