January sa M3: +1.5% y/y
M3 sa 3-mo avg: +1.7% y/y
SA private loans: +2.4% y/y

MNI survey median:
January sa M3: +2.1% y/y
M3 sa 3-mo avg: +2.0% y/y
SA private loans: +2.1% y/y

MNI survey range:
January sa M3: +1.3% to +2.5% y/y
M3 sa 3-mo avg: +1.7% to +2.1% y/y
SA private loans: +2.0% to +2.3% y/y

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

—

FRANKFURT (MNI) – Eurozone M3 money supply growth unexpectedly
slowed further in January, but private sector loan growth was stronger
than most analysts had forecast, seasonally adjusted data by the
European Central Bank showed Friday.

On the year, annual growth of M3 slowed to 1.5% in January from
1.7% in December. Analysts had forecast M3 growth in a range of 1.3% to
2.5% with a median of 2.1%.

With annual M3 growth falling further below the ECB’s reference
value of 4.5%, the central bank will see 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 December’s monetary indicators earlier this month,
ECB President Jean-Claude Trichet concluded that “broad money and loan
growth is still low, confirming the assessment that the underlying pace
of monetary expansion is moderate and that inflationary pressures over
the medium to long term should remain contained.”

However, Executive Board member Juergen Stark warned that this
interpretation is surrounded by some uncertainty given excess liquidity
in the system.

“If the liquidity is gradually reabsorbed through a deleveraging
process of a partly over-indebted private sector, it will dampen money
growth as part of a healthy adjustment process. But in the current
environment of improved confidence and economic activity, the liquidity
may also be used for transaction purposes and thus contribute to upward
price pressures,” Stark said.

Within M3, annual M1 growth slowed to 3.2% from 4.4% in December.
Short-term deposits other than overnight deposits increased 1.1% on the
year after a 0.5% decline in December. The annual rate of change of
marketable instruments decreased to -4.2% in January from -2.0% in
December.

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

Among the main counterparts of M3, annual growth of total credit
granted to euro area residents accelerated to 3.8% in January from 3.4%
in December. Growth of credit to governments was unchanged at 11.6%.

Annual growth of credit extended to the private increased to 2.0%
in January from 1.6% in the previous month. Among the components of the
latter, the annual growth rate of loans to the private sector increased
more than expected to 2.4% in January from 1.9% in the previous month.

Loans to non-financial corporations were up at 0.4% year after a
0.2% decline in December. On the month, loans were up E24 billion,
rebounding from a E25 billion drop in December.

Annual growth of loans to households picked up to 3.1% from 2.9%,
with all lending segment contributing to the rise. Growth of lending for
house purchases stood at 3.9% in January after 3.7% in December,
consumer credit declined by 0.8% in January after -1.0% in December,
while the annual growth rate of other lending to households increased to
2.8% in January from 2.6% in the previous month.

Finally, the annual rate of growth of loans to non-monetary
financial intermediaries (except insurance corporations and pension
funds) increased to 7.0% in January, up from 5.1% in the previous month,
the central bank said.

–Frankfurt newsroom +49 69 720142; e-mail: frankfurt@marketnews.com

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