May sa M3: +2.4% y/y
M3 sa 3-mo avg: +2.2% y/y
SA private loans: +2.7% y/y

MNI survey median:
May sa M3: +2.1% y/y
M3 sa 3-mo avg: +2.2% y/y
SA private loans: +2.7% y/y

MNI survey range:
April sa M3: +1.8% to +2.4% y/y
M3 sa 3-mo avg: +2.1% to +2.2% y/y
SA private loans: +2.5% to +2.9% y/y

April sa M3: +2.0% y/y
M3 sa 3-mo avg: +2.1% y/y
SA private loans: +2.6% y/y

—

FRANKFURT (MNI) – Annual Eurozone M3 money supply growth came in
higher than expected in May, while private sector net lending growth
picked up much as expected, the European Central Bank reported on
Thursday.

At 2.4%, M3 growth accelerated significantly from 2.0% in April but
remained below the ECB’s reference rate of 4.5%, suggesting that
underlying inflationary pressures were muted.

However, the ECB has cautioned repeatedly that “monetary liquidity
accumulated prior to the period of financial market tensions remains
ample and may facilitate the accommodation of price pressures in the
euro area.”

Earlier on Thursday, ECB President Jean-Claude Trichet noted that
“the underlying pace of monetary expansion gradually recovering. At the
same time, monetary liquidity remains ample. This has the potential to
accommodate price pressures.”

Benign money growth has thus not assuaged policy-makers’ concerns
over upside inflation risks. In fact, Trichet reiterated today that the
central bank is in “strong vigilance” mode, indicating that the ECB will
raise rates next weak to counter price pressures.

Within M3, annual M1 growth decelerated to 1.2% from 1.6% in April,
adding to mounting evidence that the Eurozone’s recovery is losing
steam.

Short-term deposits other than overnight deposits rose 3.9% on the
year after +3.3% in April. Marketable instruments were up 2.7% on the
year after dropping 0.8% in April.

Among the deposits included in M3, the annual growth rate of
deposits placed by households stood at 2.3% in May, unchanged from the
previous month, while the annual growth rate of deposits placed by
non-financial corporations increased to 3.7% in May from 3.3% in the
previous month, the ECB said.

Among the main counterparts of M3, annual growth of total credit
granted to euro area residents was 3.1% after 3.2% in April. Growth of
credit to governments decelerated to 6.2% from 7.4%.

The annual growth rate of credit extended to the private sector
stood at 2.4% in May, compared with 2.3% in April. Among the components
of the latter, the annual growth rate of loans to the private sector
stood at 2.7% after 2.6% in April, in line with most forecasts. Loans to
non-financial corporations were up 0.9% year as in April.

According to new statistics gathered by the ECB, including
additional data from securitization in the shadow banking system, the
annual growth of MFI loans to non-financial corporations had turned
positive already last October — months earlier than the previous data
had signaled.

However, ECB Executive Board member Juergen Stark said that even
“with the benefit of hindsight, this is very likely not a reason to have
raised rates earlier.”

Annual growth of loans to households stood at 3.4% in May as in
April, with lending for house purchases steady at +4.4% on the year.

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

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