— M3 Up +1.6% Y/Y; Slowest Since January 2011

December sa M3: +1.6% y/y
M3 sa 3-mo avg: +2.1% y/y
SA private loans: +1.0% y/y

MNI survey median:
December sa M3: +2.2% y/y
M3 sa 3-mo avg: +2.3% y/y
SA private loans: +1.5% y/y

MNI survey range:
December sa M3: +1.7% to +2.4% y/y
M3 sa 3-mo avg: +2.0% to +2.5% y/y
SA private loans: +1.5% to +1.9% y/y

November sa M3: +2.0% y/y
M3 sa 3-mo avg: +2.5% y/y
SA private loans: +1.7% y/y
—

FRANKFURT (MNI) – Private sector loan growth in the Eurozone slowed
much more abruptly than expected in December, while M3 broad money
growth came in at its slowest pace since the start of last year, the
European Central Bank reported on Friday.

On the year, loans to the private sector grew by 1.0%, a 17-month
low and well below expectations. After factoring in sales and
securitisation, loans grew at a slightly more robust 1.2%. The overall
growth rate of credit to the private sector slowed to +0.4% on the year,
0.6 percentage point down from November’s rate.

Credit extended to households slowed to 1.5% on the year from
November’s +2.1%, with loans for new mortgages – the most important part
of consumer borrowing – down 0.9 percentage point to +2.1%.

Loans to non-financial corporations slowed by half a percentage
point to +1.1%. Loans plummeted by E37 billion on the month, deepening
November’s E7 billion fall.

In its latest monthly bulletin, the ECB stressed its confidence
that the recent allotment of more than E489 billion in three-year funds
at a fixed rate of 1%, along with other liquidity-providing measures
announced at the end of last year, would help to support bank lending to
the real economy.

ECB President Draghi pointed to a number of signs that these
measures were already having a positive effect.

“For example, the bidding behaviour in the access to the LTRO is
also dependent on the amount of bonds coming due for that specific
institution in the first quarter of this year,” he said during his press
conference earlier this month.

“Also, in terms of this round-trip redeposit in the deposit
facility, it is actually quite interesting to see that, by and large,
the banks that have borrowed the money from the ECB are not the same as
those that are depositing the money with the deposit facility of the
ECB.”

Turning to developments in broad money supply, the 1.6% annual rise
in M3 cut the three-month average to +2.1%, well below the ECB’s
price-stability guideline of +4.5%.

M1 growth also came to +1.6% on the year, while the annual growth
rate of short-term deposits other than overnight deposits remained
constant at +2.1%. Marketable instruments, however, fell 0.2% over the
same period.

The moderate growth rate of M3 adds to the evidence that Eurozone
inflation pressures remain weak. January’s PMI report highlighted
further discounts in prices charged for goods and services, while
inflation expectations in Germany and France remained subdued.

Inflation rates “are likely to stay above 2% for several months to
come, before declining to below 2%,” Draghi said. “This pattern reflects
the expectation that, in an environment of weaker growth in the euro
area and globally, underlying cost, wage and price pressures in the euro
area should remain modest.”

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

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